Manufacturing production falls for the fifth month in October
Manufacturing declines in October make for the longest series of consecutive contraction since the global recession, according to Stats SA
Manufacturing production declined for a fifth consecutive month in October, figures from Stats SA revealed on Tuesday.
The October fall of 0.8% from the same month in 2018, cements a series of contractions not seen since the global recession, when, according to Stats SA, manufacturing shrank for 14 consecutive months between October 2008 and November 2009.
For the year to date, manufacturing activity has recorded a decline of 0.2%.
The data was, however, better than market expectations. Economists surveyed by Bloomberg had predicted a contraction of 2.7%, year-on-year. On a seasonally adjusted month-on-month basis, manufacturing activity rose 2.7%. Over the three months ending October, production rose 0.5%.
According to Stats SA, seven of the 10 manufacturing divisions reported negative growth rates year-on-year. The largest negative contributions came from the wood and wood products, paper, publishing and printing division; the basic iron and steel, non-ferrous metal products, metal products and machinery division; textiles, clothing, leather and footwear; and glass and non-metallic mineral products.
A significant positive contribution was made by the food and beverages division, which rose 4%, Stats SA said.
The latest manufacturing data comes as SA experiences intense load-shedding by power utility Eskom. This has contributed to worry that electricity shortage could mean SA’s economy contracts for the fourth quarter of 2019, after it shrank 0.6% in quarter three. Two consecutive quarters of contraction constitute a technical recession.
Economic growth figures reported last week revealed that the manufacturing sector was one of the largest detractors from growth during the third quarter. The sector, which accounts for 13% of GDP according to Stats SA, shrank by 3.9% during the three months to September.
Measures of confidence in the sector suggest it is unlikely to see more upbeat activity during the fourth quarter. The most recent Absa purchasing managers’ index (PMI) — a gauge of business conditions in the manufacturing industry — fell for the month of November to 47.7 points. A reading below 50 points indicates contraction.