Economic activity in the manufacturing sector was off to a good start at the beginning of the third quarter with output for July improving above expectations.
Economists broadly expected the July data to show a production rebound after falling by a disappointing 5.5% (revised from -5.2%) in June.
Stats SA said on Tuesday manufacturing production increased by 1.7% in July compared with the same month in 2023. For the first time in three months the month-on-month change was positive, with an increase of 2.1% in July compared with June.
“Five of the 10 manufacturing divisions recorded a rise in production, with the food and beverages, and metals and machinery divisions the largest positive contributors [to the year-on-year increase],” said Nicolai Claassen, director of industry statistics at Stats SA.
Manufacturers in food and beverages recorded an increase of 9.5% year on year (contributing two percentage points to the overall increase) and metals and machinery outputs rose by 5.2% (contributing 1.1 percentage points to the total).
“On the downside, the automotive industry was the most noteworthy drag on production, recording a fall of 12.1%,” Claassen said.
In a pre-release note, Investec economist Lara Hodes said they expected manufacturing activity for July to have risen by about 0.9% year on year. Absa expected year-on-year growth of 0.1%.
Economists predicted the lift in output, given the notable rise in the Absa purchasing managers index (PMI), which improved by 6.7 points to 52.4 in July because of a strong pickup in new orders and business activity.
However, in August, the index slid back into contractionary territory due to slow global and domestic demand.
The Bureau for Economic Research, which publishes the Absa PMI, said the August reading reflected high volatility in the sector amid “political uncertainty, high but slowing inflation [and] elevated borrowing costs”.
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