By Thanda Sithole
Manufacturing output, not seasonally adjusted, contracted by 0.8% y/y in September, following a revised 0.8% y/y contraction (previously -1.2%) in August. The outturn was a surprise, defying the Reuters consensus prediction of a 0.9% y/y expansion. Seasonally adjusted output was flat (0.0%) after a 0.7% m/m decrease in August, contrasting with the manufacturing PMI business activity index, which rose to 53.1 points in September from 34.6 in August, indicating potential expansion. Overall, manufacturing output increased by only 0.2% in 3Q24, down from 0.6% in 2Q24, signalling a reduced contribution to third-quarter GDP growth.
Outlook
Despite easing energy constraints and lower input costs, manufacturing activity remains sluggish, down 0.4% year-to-date (January to September). This reflects weak demand, driven by fragile consumer fundamentals and broad declines in private sector investment. External demand is also limited, constraining manufactured goods exports. We expect a gradual, uneven recovery in the near term as demand conditions improve with easing cost-of-living pressures. Although the manufacturing PMI expected business conditions index dropped to 62.7 in October from 70.8 in September, it still suggests that manufacturers anticipate modestly improving operating conditions over the near term.
Selected sector analysis
Four out of ten manufacturing divisions contributed to the 0.8% y/y decline in total manufacturing output in September. Within the major divisions:
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Motor vehicles, parts and accessories, and other transport equipment continues to experience significant declines, falling by 18.7% y/y, worse than the 16.5% y/y in August. Under this division: motor vehicles production declined sharply by 28.0% y/y after declining by 13.5%, motor vehicles, trailers, and semi-trailers declined by 22.7%, parts and accessories declined by 14.6%, and other transport equipment declined by 8.8%. Year-to-date, output in motor vehicles, parts and accessories, and other transport equipment division is down sharply by 12.2%, reflecting unfavourable demand conditions. However, new passenger car sales have increased over the past four months, which, if sustained, could eventually mitigate the decline in automotive production.
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Wood and wood products, paper, publishing, and printing contracted by 1.4% y/y after contracting by 0.4% y/y in August.
Limiting the decline in total manufacturing output:
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Food and beverages output increased 1.2% y/y following a 7.9% y/y increase in August, supported by increased activity in meat, fish and fruits, dairy products, and beverages.
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Petroleum, chemical products, rubber, and plastic products expanded by 3.1% y/y after increasing by 1.5% y/y in August, supported by increased output of petroleum products and fuel as well as plastic products.
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Basic iron and steel, non-ferrous metal products, metal products and machinery was flat (0.0% y/y) after declining by 5.2% in August. Basic iron and steel products increased by 17.3% y/y but was counteracted by an 11.0% y/y decline in structural metal products, a 7.0% y/y decline in special purpose machinery, and a 3.7% y/y decline in general purpose machinery.
