South African industrial production was not very good in December, but it is unlikely to have a significant impact on economic growth in the fourth quarter, after the previous month’s figures were revised upwards.
Production rose by 0.7 per cent year-on-year, compared to the upwardly revised 2.5 per cent in November, the Pretoria-based Statistics South Africa said in a report published on its website. On a monthly basis, there was a contraction of 1.7 per cent. Both figures were lower than analysts’ expectations. The median of estimates, according to a Bloomberg survey, pointed to a year-on-year increase of 2.7 per cent and a monthly increase of 0.4 per cent.
The seasonally adjusted “shock drop” in December’s output offsets November’s gains and means that production rose by just 0.1 per cent in the quarter, implying a tiny contribution to GDP, said Jee-A van der Linde, 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 gain momentum at the start of this year. A purchasing managers’ index fell last month to its lowest level since 2020 as demand and activity fell sharply, underlining the impact on activity of congested ports, rail bottlenecks and chronic electricity shortages.
Still, December’s disappointing data should not have a significant impact on fourth quarter growth, as it will be mitigated by stronger performances in October and November, according to Yvonne Mhango, an economist at Bloomberg Africa.
“However, the sharp drop in manufacturing PMIs in January suggests that the sector’s performance will worsen in the first quarter, largely due to logistical challenges preventing manufacturers from getting their imports from the port,” she said.
Economists consulted by Bloomberg in January forecast that South Africa probably managed an expansion of just 0.6 per cent in 2023, although the average forecast is for gross domestic product growth to double this year to 1.2 per cent. On Wednesday, the continent’s largest lender echoed that view of a stronger recovery this year, citing improvements in energy supply and a greater focus on logistics.
“It’s a bold statement, but we think we’ve turned the corner,” said Standard Bank’s chief economist Goolam Ballim. “We think Eskom. will be more reliable by 2024. We think the momentum for the reform of Transnet SOC Ltd. will increase this year and I think that will be encouraging.”
O.Económico
