Johannesburg, 11 February 2020 – Preliminary data released by Statistics South Africa (Stats SA) this afternoon captures a second consecutive monthly dip in manufacturing production as companies struggle to contain prevailing challenges and sustain robust output levels, so says Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Economist Marique Kruger.
Speaking after the release of the manufacturing production figures, Ms Kruger said the data, which generally reflects a decrease in output for December 2019, does not augur well for companies in both the Metals and Engineering (M&E) cluster of industries and the broader manufacturing sector. She said the data dampens the mood ahead of the much-anticipated state of the nation address by President Cyril Ramaphosa.
The latest preliminary data published by Stats SA shows that production in the broader manufacturing sector deteriorated on a year-on-year basis in December 2019, when compared with November 2019, further dipping from a revised -3.2 percent in November 2019 to -5.9 percent in December 2019.
On a month-on-month basis, the manufacturing sector’s performance was also disconcerting, registering -2.8 percent in December 2019 when compared to a revised -1.8 percent in November 2019.
“The general decrease in output is not good for struggling businesses in the manufacturing sector, including its diverse M&E cluster of industries which are continuously facing headwinds underpinned by stagnant domestic demand, unpredictable and costly energy supply, high petrol prices and logistics costs,” Ms Kruger said.
She said the importance of manufacturing to industrial production and the broader economy cannot be stressed enough, given its potential multiplier effects in creating jobs. A rebound in manufacturing output and consistent performance is, therefore, important towards improving the contribution of manufacturing to the real Gross Domestic Product for the fourth quarter of 2019.
Conversely, Ms Kruger said, the difficult commercial and operational environment, alongside weak job numbers and poor consumer spending on intermediate goods, highlights an important need for local businesses to innovate continuously and seek ways of producing under decreasing costs, towards better margins.