ANALYSTS EXPECT IMPROVEMENT IN SOUTH AFRICA’S MANUFACTURING SECTOR
JOHANNESBURG– Analysts expect South Africa’s manufacturing output to have improved in the month of June, saying that while the number may pick up slightly, the sector is still facing a number of external pressures.
Statistics South Africa will release its report on manufacturing output this week.
Manufacturing is expected to grow marginally in June after showing disappointing numbers in the first quarter of the year. The sector was one of the biggest contributors to the contraction of economy in the first quarter.
Nedbank economist Nicky Weimar said here Monday that the improvement in the sector would be reflected in the export number.
At Nedbank, we expect manufacturing production to increase by about 0.2 per cent over the month, and that will take your annual increase to about 1.3 per cent. We are still expecting a better performance on the export front. So, your export-oriented industries we are hopeful will help drive a recovering in manufacturing off a very low base.
Weimaar said a weaker currency, coupled with a trade war, would raise the cost of production.
The manufacturing sector is one of our biggest exporters, but is also one of our biggest importers. So, because we are a small and open economy, incredibly vulnerable to a trade war, what it will impact on initially is the cost of production,” he said.
“And if you add that with a weaker currency, it means that we are becoming less price competitive.
The latest increase to the unemployment figure points to job losses in the manufacturing sector. Absa economist Miyelani Maluleke said that with better policy intervention, the manufacturing sector had potential to create jobs in the long term.
We still don’t think that manufacturing is going to be a factor that is going to add to growth in a really big way in the short-term. We’ve already seen in the unemployment numbers as well, the sector has already lost about a 1500 jobs in Q1,” said Maluleke.
“In my view, I think it is an area that requires closer policy intervention to try to revive growth and improve prospects for the sector because it could really be one the sectors that supports employment creation over the medium term.
According to Stats SA, the manufacturing sector contributes 13 per cent to the country’s economy.
Source: NAM NEWS NETWORK