Analysts expect manufacturing output to have improved in the month of June. They say while the number may pick up slightly, the sector is still facing a number of external pressures.
Statistics South Africa will release their 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.
Manufacturing was one of the biggest contributors to the contraction of economy in the first quarter.
Nedbank Economist Nicky Weimar says improvement in the sector will be reflected in the export number.
“At Nedbank, we expect manufacturing production to increase by about 0.2% over the month, and that will take your annual increase to about 1.3%. 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 says a weaker currency coupled with a trade war will raise the cost of production.
“Manufacturing 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. 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 joblosses in the manufacturing sector.
Absa Economist Miyelani Maluleke says with better policy intervention, the sector has 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. 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% to the country’s economy.
