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South Africa’s manufacturing output slows in June for third consecutive month

South Africa’s manufacturing output slows in June for third consecutive month
A factory worker watches the production line at the Coca-Cola bottling plant in Olifantsfontein, South Africa. (Photo: Henner Frankenfeld / Bloomberg via Getty Images)

South African manufacturing output fell on a monthly basis for the third consecutive month in June, Statistics South Africa (Stats SA) said on Tuesday. June’s month-on-month decline was a moderate 0.7%, but it highlights the fragile state of the economic recovery just ahead of July’s social unrest and looting.

Compared with June last year, when lockdown restrictions were still curbing a lot of economic activity, the data look pretty good – a 12.5% increase. This was led by motor vehicles, parts and accessories and other transport equipment – a sub sector which saw production surge 84.1% on a year-on-year basis. This followed other hefty annual increases. In May, the annual rise was 36.3% and in April it was 88.1%. None of this is a shocker after the economic collapse in April last year, which was the hardest lockdown month of them all.  

But the recent month-on-month changes suggest that the recovery in manufacturing has been stalling. In June it declined 0.7% compared with May; in May it fell 2.0% and in April it eased 1.4%. This means that manufacturing output was contracting on a monthly basis before July, when it is widely expected to have tanked because of disruptions related to the mayhem and destruction that ensued after the jailing for contempt of former president Jacob Zuma. An unprecedented fall in the Absa Purchasing Managers’ Index (PMI) in July suggests this was indeed the case. (Confidence shattered: Absa PMI plunged during the hard…)

The three-month change to the end of June, compared to the previous three months, was a 1% decline, which does not bode well for the second quarter GDP number. Indeed, March was the only month this year when manufacturing output rose on a monthly basis. 

Another instructive prism to view the data through is comparing the first half of this year with that of the pre-pandemic state of affairs in 2019. 

“Manufacturing output was up by 16.4% in 1H21 compared with 1H20, but down by 4.0% compared with 1H19, broadly reflecting a steady but incomplete recovery,” FNB economist Thanda Sithole noted in a commentary on the data. 

So, output in the sector remains short of “pre-pandemic” levels and there are still plenty of headwinds standing in the way of a full recovery. These include the usual suspects, such as load shedding and rising production costs. There are also concerns about the prospects for renewed social unrest and another pandemic wave, which could see renewed restrictions. The potential for industrial action also looms on the horizon. 

Meanwhile, expect the July number to be very bad. DM/BM

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