Picture: ISTOCK
Picture: ISTOCK

The manufacturing sector grew slightly in June, but not enough to avoid dragging down the second quarter’s gross domestic product (GDP) growth figure.

Manufacturing output increased by 0.7% in June from the same month in 2017, Statistics SA reported on Tuesday.

May’s figure was revised up to 2% from the previously reported 1.5%, which was not enough to bring the three months seasonably adjusted average for the second quarter above zero.

Manufacturing output declined by 0.1% in the three months ended June.

The biggest negative contributors in June were motor vehicles and parts, with an annual decline of 3.3%, followed by wood and paper production, which fell 1.5%.

Best growth was contributed by the food and beverage industry, which increased output by 4.3%, followed by fuel refineries at 1.7%.

South African factories have battled difficult trading conditions recently, given international trade wars, continued domestic political uncertainty, higher fuel prices and some electricity disruption.

Stats SA’s volume of manufacturing production index, which was set to 100 in 2015, was 102.4 points in June, down from 102.5 in May.

This monthly drop was forecast by the Absa purchasing managers’ index (PMI), which slid to a disappointing 47.9 points in June from 49.8 points previously.

Elize Kruger, a senior economist at NKC African Economics, forecast 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".

FNB forecast a 3% improvement year on year, which was mainly supported by petroleum production, while Investec expected a rise of 1.8 % year on year.

FNB chief economist Mamello Matikinca said before the data was released: "We do not expect the production figures to be discouraging.

"Given the severity of the first quarter contraction in the sector, we expect GDP to turn positive on a quarter-on-quarter basis, albeit only modestly."

Investec economist Lara Hodes said: "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. Strengthening demand was reflected in higher new sales orders in July, which in turn supported a lift in business activity."

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