S.Africa manufacturing production declines in August

Manufacturing output in South Africa took a hit in August, contracting by 1.2% year-on-year, following a revised increase of 1.6% year-on-year in July. This decline was slightly worse than the consensus prediction of a 0.5% year-on-year decrease. Seasonally adjusted manufacturing output also fell by 0.6% month-on-month, partially offsetting the previous month's 1.6% expansion. Thanda Sithole, Senior Economist at FNB, joined CNBC Africa to discuss the factors behind this decline and the implications for the economy. Sithole mentioned that the BER Manufacturing PMI Business Activity Index had already signaled weak output in August, with significant declines seen in the automotive sector. The automotive division, including motor vehicles and related components, posted double-digit declines, contributing to the overall contraction in manufacturing. Despite some positive growth in divisions like food and beverages, the weak consumer fundamentals and private sector fixed investment are weighing on manufacturing production. Sithole highlighted the challenging global manufacturing environment, indicating that external demand is not supportive of South Africa's exports. However, he expressed optimism for a potential recovery in domestic production in the near term, fueled by improved business confidence, easing cost-of-living pressures, and interest rate cuts by the Reserve Bank. Looking ahead, Sithole emphasized the importance of supporting domestic demand to boost manufacturing production and drive GDP growth. He noted that interest rate cuts should provide immediate relief for debt repayment and stimulate private sector investment. Overall, while global manufacturing faces challenges, there are opportunities for South Africa's manufacturing sector to rebound with the right policy support and economic conditions.