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Experts remain pessimistic about manufacturing
Experts remain pessimistic about manufacturing

Experts remain pessimistic about manufacturing

ECONOMIC NEWS - Dec 5th 2016, 10:01

Manufacturing production is unlikely to contribute meaningfully to economic growth this quarter 

Although factory managers were upbeat about their performance in November, experts say such output was unlikely to contribute meaningfully to economic growth this quarter.

The Barclays-sponsored purchasing managers index reversed October’s losses in November and rose 2.4 points to 48.3, data compiled by the Bureau for Economic Research showed on Thursday.

Three of six subindices rose and the PMI leading indicator edged up, as new sales orders outpaced inventories. This signaled that production could lift in coming months.

Investec economist Kamilla Kaplan said actual manufacturing production in the fourth quarter will not recover "meaningfully" from the 1.3% quarter-on-quarter seasonally adjusted contraction in the third quarter.

Philippa Rodseth, Manufacturing Circle CEO, said the industry, which contributes 13.7% to GDP, remained "fragile".

On Thursday, Statistics SA said electricity production rose 2% year on year compared to 1.1% in September. But consumption fell by 1.3% year on year as economic activity remained weak.

Tafadzwa Chibanguza, senior economist at the Steel and Engineering Industries Federation of Southern Africa, said "we have not yet turned the corner.… With production in the metals and engineering sector having contracted 4.18% at our latest reading, it would take a lot more successive monthly increases to turn the trend around."

Increased orders lifted the Barclays business activity sub-index to 48.9 points from 43.5 points in October.

Bureau for Economic Research economists said the improvements should be sustained but tax hikes likely to be announced in the Treasury’s 2017 budget may further dampen consumer spending.

John Ashbourne, an economist at Capital Economics, said while below-50 PMI readings were not accompanied by sharp drops in manufacturing output, they have been a reliable sign of weak growth or stagnation.

"Early signs are that the economy was pretty weak going into [the fourth quarter)]"
© Business Live MMXVI 

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