Drop in export demand sees manufacturing slide in November

• Manufacturing production declined 3.5% year-on-year in November.
• The decline can be attributed to the drop in export demand, as many of SA's trading partners have extended lockdowns.
• The momentum of the recovery in the industry started slowing in the fourth quarter.

Manufacturing production decreased by 3.5% in November, on a year-on-year basis - this was expected, as export demand declined during the last quarter of 2020.

Statistics South Africa on Tuesday released November's manufacturing data. Investec priced in a tamer decline of -2.2% compared to the -3.5% which was registered.

Among the biggest contributors to the year-on-year decline were petroleum, chemical products and rubber and plastic products – down 9.6%. These were followed by food and beverages production, which declined by 2.9%, and basic iron and steel, metal products and machinery, which declined 3.9%.

Month on month, production levels declined 1.3% compared to October 2020.

However, for the three months leading up to November, manufacturing production increased by 8.9% - this as all 10 manufacturing categories reported positive growth rates, Stats SA said.

Investec economist Kamilla Kaplan noted that manufacturing activity expanded in the fourth quarter, but at a slower pace than the third quarter of 2020. "During Q4.20, manufacturing activity was held back by a decline in export demand," Kaplan said in a note.

Continued pressure

The Absa Purchasing Manager's index, which measures economic activity in the manufacturing sector, had eased to 52.6 index points in November, following its record high of 60.9 points reported in October, Fin24 previously reported.

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Economists from the Bureau for Economic Research (BER) pointed out that although there may be a quarter-on-quarter uptick in manufacturing output, the pace of recovery has slowed. "Export sales were under continued pressure, while renewed lockdown restrictions and load shedding (especially if not contained to late evenings) are likely to depress domestic demand going forward," the report read.

Some of South Africa's major trading partners such as the UK and Germany have extended lockdowns, which will influence the domestic economic recovery, chief economist of the BER Hugo Pienaar, previously said.

The automotive industry, which accounts for 27.6% of the country' manufacturing output, previously said that its recovery from the impact of the Covid-19 pandemic depends on the recovery of its main trading partners, and the pace at which their lockdown measures are phased out. Over 60% of the country's vehicle production is exported.