Picture: THINKSTOCK
Picture: THINKSTOCK

June manufacturing production will be the highlight of economic data due to be released this week as it is likely to shed light on the economy’s overall performance during the second quarter.

The sector has battled difficult trading conditions recently given international trade wars, continued domestic political uncertainty, higher fuel prices and some electricity disruption. The Absa purchasing managers’ index (PMI) for June disappointed by sliding to 47.9 points, from 49.8 points previously. Economists have forecast an improvement in the sector’s performance.

Elize Kruger, a senior economist at NKC African Economics, has predicted a 0.5% seasonally adjusted rise from May to June from 1.5% previously, but a 2.5% year-on-year increase, not seasonally adjusted, from 2.3% previously.

This suggested that production recovered in June "given resilient growth in our trading partners despite trade war concerns, as well as the weaker rand in recent months probably supporting export orders for locally manufactured goods", she said.

'Cost pressures'

Investec expects a rise of 1.8% year on year.

"Although cost pressures and waning global export order growth continue to weigh on manufacturers, the recently released July PMI … points to a moderate improvement in the manufacturing sector at the start of the third quarter," Investec economist Lara Hodes said.

"Strengthening demand was reflected in higher new sales orders in July, which in turn supported a lift in business activity," Hodes added.

Manufacturing production data will be published on Tuesday. FNB has forecast a 3% improvement year on year that is supported mainly by petroleum production.

As the sector accounts for about 14% of national GDP, June’s manufacturing production data would be important to determine the extent to which GDP recovered in the second quarter, FNB chief economist Mamello Matikinca said.

The Reserve Bank will also publish information on gold and foreign exchange for July on Tuesday, as well as the statement of assets and liabilities. On Wednesday the South African Chamber of Commerce will release its business confidence index for July that dipped 0.3 index points to 93.7 in June as seven of the 13 subindices reflected negativity in the business environment.

It was the first time in 2018 the index had touched levels below those of a year ago.

speckmana@businesslive.co.za