TOTAL manufacturing output (not seasonally adjusted) grew by 2.5% y/y in May, extending the first annual gain of 3.6% y/y registered in April 2023 following six consecutive months of decline. The outturn aligned with the Bloomberg consensus prediction, comments FNB on Stats SA’s latest data.
Seasonally adjusted manufacturing output, which aligns with the official calculation of quarterly GDP growth, shrank by 1.3% m/m after expanding by 0.7% m/m previously (revised up from 0.5% m/m), clouding expectations of the sector’s positive contribution to 2Q23 GDP growth. YTD (January to May), manufacturing output is down by 1.1% compared to the same period last year. This mainly underscores weakness in manufactured non-durable goods (-2.4% YTD); meanwhile, manufactured durables goods are up by only 0.3%.
Outlook
We maintain our view that near-term activity in the manufacturing sector remains fragile and clouded by the uncertain direct impact of loadshedding, particularly during winter (and beyond), transport and logistical constraints, as well as moderating domestic and external demand. This is consistent with the latest manufacturing PMI for June, which remained in contractionary terrain (i.e., below the 50-neutral mark) for the fifth successive month and, in fact, fell to 47.6 index points from 49.2 in May, despite loadshedding reprieve.
Selected sector analysis
Output increased strongly by 15.1% y/y in the motor vehicles, parts and accessories and other transport equipment division, with motor vehicles output expanding by 17.4% y/y in May (up by 7.0% y/y in April) and parts and accessories expanding by 22.5% y/y (up by 11.9% y/y in April). Output in the basic iron and steel, non-ferrous metal products, metal products and machinery division also expanded by 5.8% y/y in May after expanding by 4.7% y/y in April. This underscored strong growth of 10.5% y/y in structural metal products, 5.7% y/y in non-ferrous metal products, and 13.4% y/y growth in other fabricated metal products.
Output in the wood and wood products, paper, publishing and printing division was up by 2.5% y/y, reflecting a modest acceleration from 1.7% y/y in April. The food and beverages division posted growth of 1.3% y/y, reflecting a moderation from 4.6% y/y in April. Meanwhile, output in the petroleum, chemical products, rubber and plastic products division was down by 3.4% y/y, following growth of 2.9% y/y in April.
Interestingly, despite the 1.3% monthly contraction in total manufacturing output, energy-intensive divisions such as basic iron and steel, non-ferrous metal products, metal products and machinery expanded by 1.5% m/m in May (+0.3% m/m in April) and the glass and non-metallic mineral products division expanded by 4.3% m/m (+5.3% m/m in April). Meanwhile, the motor vehicles, parts and accessories and other transport equipment division expanded by 6.0% m/m after contracting by 4.5% m/m in April.
