Investec economist Lara Hodes said the manufacturing sector was expected to detract from the fourth quarter GDP outcome after the decline on a quarter-on-quarter seasonally adjusted basis, output. Picture: Henk Kruger/Independent Newspapers
Manufacturing output in South Africa is expected to shrink in the fourth quarter of 2024 after production declined, albeit slower than expected, dragged lower mainly by motor vehicles and transport equipment.
Data from Statistics South Africa (Stats SA) on Tuesday revealed that manufacturing production fell by 1.2% year-on-year in December 2024, following a downwardly revised 1.9% decrease in the prior month, and coming in below the expected 1.7% drop.
Stats SA said the decline in manufacturing output in December was broad-based, with eight out of 10 divisions recording contractions.
The overall decline was largely driven by significant drops in the basic iron and steel, non-ferrous metal products, metal products, and machinery category and the motor vehicles, parts and accessories, and other transport equipment division.
Meanwhile, increases were only seen for food and beverages and petroleum, chemical products, rubber and plastic products.
“The December 2024 manufacturing data concludes the results for the fourth quarter and the calendar year,” said Nicolai Klaassen, director of industry and statistics at Stats SA.
“In the fourth quarter of 2024, seasonally adjusted manufacturing production decreased by 0.8% compared with the third quarter of 2024.”
Investec economist Lara Hodes said the manufacturing sector was expected to detract from the fourth quarter GDP outcome after the decline on a quarter-on-quarter seasonally adjusted basis, output.
“Lacklustre performance of the manufacturing sector is in line with the movement of the Absa Purchasing Managers' Index which slid further into contractionary territory at the end of 2024, with both the business activity and new sales orders indices declining,” Hodes said.
“Indeed, some respondents noted that conditions in December 2024 were worse than usually seen in December, while “export sales dropped sharply and fell back to levels last seen in the first half of 2024, with manufacturing conditions in a number of key countries globally still subdued.”
According to Stats SA, six of the 10 manufacturing divisions reported negative growth rates over this period.
For the 2024 calendar year, South Africa manufacturing activity decreased by 0.4%. The automotive division and metals and machinery products were the largest negative contributors.
Seasonally adjusted manufacturing output is crucial for quarterly gross domestic product (GDP) calculations, and falling by 2.4% month-on-month aligned with the Purchasing Managing Index Business Activity Index, indicating that the sector weighed on overall GDP growth.
FNB senior economist, Thanda Sithole, said the manufacturing sector remained under pressure in 2024, constrained by weak domestic demand and a challenging global environment.
“Output declined by 0.4% for the year, following subdued growth of 0.6% in 2023. The weakness was largely driven by a sharp 13.3% contraction in motor vehicle, parts, and accessories production, in line with sluggish new vehicle sales,” Sithole said.
“However, with new vehicle sales showing signs of improvement, automotive production is expected to recover modestly, providing some support to overall manufacturing output. Additionally, an anticipated improvement in domestic aggregate demand, coupled with the suspension of load shedding, should help drive manufacturing recovery in 2025.”
BUSINESS REPORT