Johannesburg, 11 December 2018 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the preliminary production data for the Metals and Engineering (M&E) cluster of industries released by Statistics South Africa (Stats SA) today.
“The data, which reflects an increase in output for October 2018, augurs well for both the cluster and the broader manufacturing sector,” the Federation’s Chief Economist, Michael Ade, said this afternoon.
After adjusting for the sectoral weights, the preliminary seasonally-adjusted production data for the M&E sector indicated that output improved to 11,9 percent on a year-on-year basis in October 2018, when compared to October 2017. The improved performance is in line with an increase in production in the broader manufacturing sector, which also increased by 3,0 percent year-on-year in October 2018, following comparatively positive but lower output levels recorded in September 2018 and August 2018 respectively.
On a month-on-month basis, the M&E sector also performed well, improving from 0,3 percent in September 2018 to 9,3 percent in October 2018. The sector’s improved monthly performance was mainly supported by higher output in the petroleum, chemicals, rubber and plastic products (1,8 percent) and the basic iron and steel, non-ferrous metal products, metal products and machinery (1,7 percent) sub-industries.
“Against the backdrop of a slowly improving economy, the improvement in production for the cluster is encouraging. Evidently, producers were able to take advantage of a brief strengthening of the rand to capitalise on the importation of cheaper intermediary inputs, leading to the best increase in manufacturing production since the start of the year,” Dr Ade said.
He said the sector’s performance also coincides with an improved pace of the real Gross Domestic Product (GDP) growth, which surprised on the upside during the third quarter of 2018, officially moving the domestic economy out of a technical recession and providing impetus for more output, investment and employment.
Dr Ade said it is very important that the sub-components of the M&E cluster continue to expand, given the need to continuously improve on overall job numbers in the broader manufacturing, which is still a cause for concern. The latest Quarterly Employment Statistics numbers released by Stats SA earlier today shows that manufacturing employment decreased by 0,6% or 7,000 jobs quarter on quarter in June 2018 to September 2018, despite the sector’s positive contribution to GDP growth in the same quarter.
Dr Ade said this highlights the need to maintain the output growth momentum towards better employment numbers.
Dr Ade said that he hoped that the encouraging increase in domestic growth will translate to higher demand for intermediate and final manufactured goods, which will invariably have a positive impact on production and employment within the manufacturing sector. He noted that, importantly, businesses are optimistic that the recent slowdown in fuel prices will also have a positive impact on companies’ logistics costs in the short term, thus enabling an up-tick in business activity to the expansionary zone.
“These dynamics are encouraging and SEIFSA is optimistic that the basis for a continuous improvement in output going into the new year now exists for businesses to leverage on, and further expand,” Dr Ade concluded.
SEIFSA is a National Federation representing 23 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people.