Manufacturing output up 4% y/y in May

Manufacturing production increased by 4% year-on-year in May.

The increase was driven by increases in output in the petroleum, chemical products, rubber and plastic products; wood and wood products, paper, publishing and printing; food and beverage; motor vehicles, parts and accessories and other transport equipment; and basic iron and steel, nonferrous metal products, metal products and machinery subsectors.

Further, the seasonally adjusted manufacturing production increased by 1.6% month-on-month in May. This followed month-on-month changes of 0.4% in April and -0.5% in March.

Nedbank noted that the better-than-expected manufacturing production numbers for May were encouraging, but warned that conditions in the manufacturing sector would likely remain relatively subdued this year.

“The fortunes  of  the  manufacturing  sector  are closely linked to those of the mining industry and with mining being adversely affected by low commodity prices – which are unlikely to reverse convincingly in the short term – manufacturing production is also likely to suffer.

“In addition, considerable global excess capacity and rising domestic production costs will also negatively impact production,” Nedbank commented.

It added that the latest manufacturing figures were encouraging, but that other data suggested that the economy was still not on a path to a sustainable recovery.

“This leaves the Reserve Bank in a difficult position of determining rates in an environment of very low growth and inflation which is forecast to average 6.5% in 2016.”