South Africa's factories had another rough month. Manufacturing production fell 1.7% in June compared with a year earlier, according to Statistics South Africa, an improvement on the revised 4.4% drop in May but still a decline. The data confirmed a second straight quarterly contraction for the sector, which points to yet another drag on economic growth after a soft start to the year.
Where the weakness was
The damage was concentrated in a few industries. Food and beverages output fell 3.9% and knocked a full percentage point off the headline figure, while wood, paper, publishing and printing slumped 8.9%, its twelfth month of decline in a row, and shaved off another 0.9 of a percentage point. Motor vehicles, parts and other transport equipment were the third-biggest drag, down 5.3% over the year. It was not all red: seven of the sector's 10 divisions were actually stronger than a year earlier, but their gains were not enough to lift the total into positive territory.
The quarter, and the bigger picture
Month to month there was a flicker of life, with seasonally adjusted output up 0.9% in June after a revised 1.0% rise in May. But over the April-to-June quarter production still fell 1.5%, with seven of the 10 divisions contracting, following a 0.8% first-quarter drop that had already helped hold GDP growth to an underwhelming 0.5%. That makes factory output a likely drag on second-quarter growth too. Manufacturing now makes up about 13% of the economy, down from around 23% in the 1990s, a long slide that leaves less cushion each time output dips.
Economists are not expecting a quick turn. Investec's Lara Hodes points to elevated uncertainty and higher input costs tied to the war in the Middle East, alongside high administered prices at home and logistics inefficiencies that weigh on exports, as pressures unlikely to lift soon. With the sector confirmed as another dampener on second-quarter GDP, and manufacturing having already fallen in the first quarter, the June figure reads less like a one-off stumble than a symptom of an industry that has been shrinking within the economy for three decades.
