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# SA factory output slumps 4.3%, muddying the Reserve Bank's rate call
- URL: https://www.businessbagel.com/sa-factory-output-slumps-4-3-muddying-the-reserve-banks-rate-call/
- Published: 2026-07-12T08:54:58.000Z
- Updated: 2026-07-12T08:54:58.000Z
- Description: Manufacturing production fell 4.3% in the year to May — its steepest drop in over a year — piling pressure on second-quarter growth just as the Reserve Bank weighs another rate hike.
- Author: Philip Ziegler
- Tags: Economy, Business Bagel News, #big

South Africa's factories went backwards again in May, with manufacturing production shrinking 4.3% compared with a year earlier — the sharpest annual contraction in just over a year. The figures, released by Statistics South Africa on Thursday, point to a sector still buckling under higher input costs, much of it traced back to the oil-price shock from the war between the United States and Iran.

\-4.3%Annual drop in manufacturing output, MaySource: Stats SA+1.1%Month-on-month rise (seasonally adjusted)

## A broad-based decline

Seven of the ten manufacturing divisions had a weaker month, according to Stats SA director of industry statistics Nicolai Claassen. Food and beverages did the most damage, retreating 6.4% year on year and single-handedly dragging overall output down by 1.6 percentage points. Wood, paper and printing, furniture, and glass and non-metallic mineral products also fell sharply. Only three divisions — petroleum and chemicals, textiles and clothing, and electrical machinery — managed to grow, and not by enough to turn the tide.

There was a sliver of relief in the monthly numbers: on a seasonally adjusted basis, production actually rose 1.1% between April and May. But the broader trend is weak — output over the three months to May slipped 1% — and economists warn the factory sector is shaping up to be a drag on second-quarter GDP after the economy managed just 0.5% growth in the first quarter.

"Manufacturers continue to face elevated production costs, lingering effects from the … Middle East conflict and persistent domestic infrastructure constraints," said FNB economist Thanda Sithole, who noted that business confidence in the sector remains subdued.

## What it means

The timing is awkward. The Reserve Bank's Monetary Policy Committee meets on 23 July, and this data hands it a genuine dilemma. Inflation quickened to 4.5% in May and factory-gate producer prices jumped 7.8%, which argues for another hike after May's 25-basis-point increase took the repo rate to 7%. But a stalling economy argues for restraint. For households and business owners, the read is uncomfortable: borrowing costs could climb again even as growth cools — a squeeze that rarely feels fair.

## Sources

- [Business Day](https://www.businessday.co.za/economy/2026-07-09-manufacturing-43-slump-points-to-weak-gdp-growth-complicating-rate-decision/?ref=businessbagel.com)
- [Jacaranda FM](https://www.jacarandafm.com/news/news/manufacturing-production-fell-by-43-yy/?ref=businessbagel.com)