Nedbank: Manufacturing production

09 Nov.

Nedbank Economic Commentary: Manufacturing production – September 2011.

Manufacturing continues to rebound from the mid-year slump.

• Manufacturing output improved further in September, rising by 7,7 % y-o-y from a revised 5,9 % (previously 5,6 %) in August. However, this figure reflected the continuing rebound from the strike-driven plunge in production during the second quarter.
• On a seasonally adjusted basis manufacturing output increased by 0,2 % m-o-m and was up by only 0,1 % in the three months to September compared to the same period to August.
• The outlook for manufacturing activity still remains uncertain. Global demand conditions remain fragile. Output in industries that supply to the local market will be contained by slower domestic spending – on fragile confidence – as well as the slow recovery in fixed investment activity and weakness in the building and construction industries.
• Stronger-than-expected output numbers for August and September are encouraging and bode well for third quarter gdp growth. However, the overall growth picture remains weak. Despite the deteriorating inflation outlook, we expect the Reserve Bank to continue with its wait-and-see approach and leave interest rates flat well into 2012. However, if the crisis in the Eurozone tips the region into recession and South Africa’s growth slows significantly in the early part of next year, the Bank may well be prompted to cut interest rates.

Comment

The continued rebound in manufacturing is encouraging. However, the strong figure partly reflected the continuing rebound from the strike-driven plunge in production in June and July. Key contributors to the annual increase were ‘motor vehicles, parts, accessories and other transport equipment’, which surged by 51,1% y-o-y, mainly reflecting improving exports. ‘Basic iron and steel, non-ferrous metal products, metal products, machinery’ (6,3% y-o-y) and ‘petroleum, chemical products, rubber and plastic products’ (2,3% y-o-y) also contributed to the higher growth rate.

On a seasonally adjusted basis manufacturing output increased by 0,2% m-o-m following the strong 8,1% rise in August.

In the third quarter, total manufacturing output fell by 0,1% q-o-q but was up by 2,4% y-o-y, with ‘motor vehicles, parts, accessories and other transport equipment’ up by 7,8% q-o-q, ‘petroleum, chemical products, rubber and plastic products’ down by 1,9%, while output of ‘basic iron and steel, non-ferrous metal products, metal products, machinery’ dropped by 7,7% q-o-q. …

See the full Commentary