Manufacturing production unexpectedly fell sharply in March as overall demand for manufactured goods remained weak. Manufacturing production in March 2024 decreased by 6.4% compared to March 2023.
The sharp decline in South African factory output in March meant that production in the first quarter of 2024 was down by 1.0% compared to the fourth quarter of 2024, indicating that manufacturing contracted during this period. Suggests.
Gia van der Linde, senior economist at Oxford Economics Africa, said large declines in production of cars and related products, metals and machinery explained much of the weakness in March.
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Seasonally adjusted manufacturing production plunged by 2.2% in March, compared with the 1.0% decline recorded in February, according to the statistics agency. On an annual basis, manufacturing output decreased by 6.4%, compared to February's 4.0% increase.
“We expected overall production to calm down in March, but the latest production results are much weaker than expected,” van der Linde said.
Negative factors for annual decline
The biggest negative factors for the annual decline are:
- Motor vehicles, parts and accessories, and other transportation equipment (-25.9%, contribution rate -2.7 ppt)
- Basic steel, non-ferrous metal products, metal products and machinery (-9.0%, contribution -1.9 ppt)
- Petroleum, chemicals, rubber and plastic products (-3.9%, contribution -0.8 ppt).
Five out of ten manufacturing sectors reported negative growth rates in the first quarter of 2024. The largest negative contributions are:
- Motor vehicles, parts and accessories, and other transportation equipment (-14.9%, contribution of -1.5 percentage points)
- Basic steel, non-ferrous metal products, metal products and machinery (-3.1%, contribution -0.6 percentage points).
The biggest positive contributions were made by:
- food and beverages (2.7%, contribution of 0.6 percentage points);
- Petroleum, chemicals, rubber and plastic products (2.6%, contribution of 0.5 percentage points).
Also read: Manufacturing PMI shows good start to second quarter
Increase in manufacturing sales
Seasonally adjusted manufacturing sales increased 0.1% in the first quarter of 2024 compared to the fourth quarter of 2023. The biggest positive factors are:
- Food and Beverage (5.6%, contribution of 1.3 percentage points) and
- Petroleum, chemicals, rubber and plastic products (4.3%, contribution 0.9 percentage points).
The largest negative contribution was made by the Motor Vehicles, Parts and Accessories and Other Transportation Equipment sector (-8.6%, contribution of -1.5 percentage points).
The sharp decline at the end of the first quarter hit multi-month lows for both the month and the year.
Van der Linde said the stronger-than-expected drop in seasonally adjusted manufacturing production in March implied a negative contribution to total gross domestic product (GDP) in early 2024.
“This also means that the risk of negative growth on a quarterly basis has increased in the first quarter. Having said that, much will depend on the outstanding economic data to be released in March. Although load shedding was not particularly pronounced in the final month of the first quarter, the latest data supports our view that overall demand for manufactured goods remains fundamentally weak.
Meanwhile, no load shedding was implemented in April, which supports business conditions across South Africa's factory sector and signals a good start to the second quarter of 2024, he said.
“In any case, we estimate economic growth in the first quarter of 2024 to be 0.2% QoQ, and our 2024 real GDP growth forecast remains below consensus at 0.7%.”
