South African manufacturing production underwhelmed in December, but it is unlikely to have a meaningful bearing on fourth quarter economic growth after the previous month’s figure was revised higher.
Output rose 0.7% from a year earlier, compared with an an upwardly revised 2.5% in November, Pretoria-based Statistics South Africa said Thursday in a report published on its website. On a month-on-month basis it contracted 1.7%. Both readings were less than analysts had expected. Their median estimates in a Bloomberg survey was for a year-on-year increase of 2.7% and a monthly gain of 0.4%.
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The “shock fall” in December’s seasonally adjusted output offsets gains in November and means production rose by just 0.1% in the quarter, implying a tiny contribution to GDP, said Jee-A van der Linde, a senior economist at Oxford Economics. “Overall, underlying local demand for manufactured goods is weak.”
The slowdown may add to concerns that factories are struggling to build momentum at the start of this year. A purchasing managers’ index plummeted last month to the lowest level since 2020 as demand and activity dropped sharply, underscoring the impact on activity of congested ports, railway bottlenecks and chronic electricity shortages.
Still, the disappointing December data shouldn’t have a meaningful impact on fourth quarter growth as this will be mitigated by stronger performances in October and November, according to Yvonne Mhango, Bloomberg Africa economist.
“However, manufacturing PMIs’ sharp fall in January suggests the sector’s performance will worsen in the first quarter, in large part due to logistical challenges hindering manufacturers from getting their imports from the port,” she said.
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Economists polled by Bloomberg in January predict South Africa probably eked out an expansion of just 0.6% in 2023, though the average forecast is for gross domestic product growth to double this year to 1.2%. The continent’s largest lender on Wednesday echoed that view for stronger recovery this year, citing improvements in energy supply and increased focus on logistics.
“It’s a bold statement, but we think we’ve turned the corner,” said Standard Bank chief economist Goolam Ballim. “We think Eskom. will be more reliable in 2024. We think the momentum towards Transnet SOC Ltd. reform will increase this year and I think that will be encouraging.”
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