Nedbank’s Economic Unit expects a depressed manufacturing outlook for South Africa in 2016 according to Engineering News. This in response to the Stats SA monthly manufacturing production and sales report released on Tuesday that shows a 1% year-on-year decline in manufacturing activity in November 2015. This as Investec believes that the sector will continue to face a number of “headwinds,” with tepid growth in foreign demand limiting the potential expansion of local manufactured goods exports.
The lower production in the basic iron and steel, nonferrous metal products, metal products and machinery division, contributed -7% and -1.3 percentage points respectively, leading experts to forcast a continued downward trend.
Engineering News goes on to report that seasonally adjusted manufacturing production decreased 1.2% in November 2015, compared with October 2015, following month-on-month changes of -1.7% and 2.3% in October and September 2015 respectively.
“The consensus market forecast was for a decline of 0.4% year-on-year,” Nedbank commented. It was expected that weak global demand, excess global production capacity, depressed commodity prices, significant domestic infrastructure constraints, high cost structures, “muddled” economic policies and fading domestic demand would continue to drag output in the near future.”
Investec said to clients, “The actual manufacturing production data underscores the Purchasing Manager’s Index (PMI) survey which, in November, set the manufacturing sector at its worst reading since the 2008/9 recession. The PMI gauge has registered contractionary readings throughout the second half of 2015.”