Flooding in KwaZulu-Natal and the prevailing nationwide power cuts have plunged South Africa’s manufacturing activity into a precarious situation that may dampen activity for longer.
Statistics South Africa (Stats SA) said yesterday that manufacturing production contracted more than expected in April, reflecting the adverse impact of severe flooding and intense load shedding.
Manufacturing output plunged by 7.8 percent from a year earlier in April following a downwardly revised 0.6 percent decline in March, and worse than market expectations of a 2.6 percent drop.
This April manufacturing print marked the second consecutive month of falling activity and at the quickest pace since last October.
Stats SA's director of industry statistics, Nicolai Claassen, said seven of the 10 manufacturing divisions recorded a decline in output.
The main declines were observed in the production of motor vehicles, parts and accessories and other transport equipment linked to a forced temporary shutdown of the Toyota plant owing to the KZN floods.
“The automotive division was the biggest drag on overall production, falling by 28.6 percent year-on-year. This was due to the slowdown in production of parts and accessories, as well as motor vehicles,” Classen said.
“The petroleum, chemicals, rubber, and plastic products division was the second largest negative contributor to the overall manufacturing production growth, registering a decline of 10.3 percent.”
On a seasonally adjusted monthly basis, manufacturing output declined by 5.4 percent, the most in six months, compared with market estimates of a 2 percent fall.
Over the three months to April, factory production eased by 0.9 percent compared to the previous three months.
The manufacturing industry grew by 4.9 percent in the first quarter of 2022, contributing 0.6 of a percentage point to the 1.9 gross domestic product (GDP) growth for the quarter.
Data from Stats SA, however, has not yet measured the economic impact of the devastating floods in KZN, which occurred during the second quarter in April.
Nedbank economist Tachin Ramnath said although the manufacturing sector had a solid first quarter, the outlook for the second quarter remained subdued.
Ramnath said the ongoing hostilities in Ukraine would continue to dampen global trade, place upward pressure on commodity prices and exacerbate material shortages and supply chain blockages.
“The impacts of the intense flooding in KZN are expected to linger in the system for some time and constrain output,” Ramnath said.
“Meanwhile, production lines will continue to be disrupted by unreliable energy supply unless alternative energy sources are secured.
“However, on the positive side, the reopening of the Chinese economy and the gradual normalisation in the domestic economy will provide some support to the sector.”
BUSINESS REPORT