FNB: S.Africa manufacturing output ended 2024 on a weak note

South Africa's manufacturing sector ended 2024 on a weak note, with a 1.2% year-on-year decline in December, following a revised 1.9% year-on-year slide in November. Thanda Sithole, Senior Economist at FNB, shared insights on CNBC Africa about the sector's performance and outlook. While the data was slightly better than the consensus prediction of a 1.7% contraction, it still highlighted challenges faced by the manufacturing industry. Two main contributors to the decline were the automotive sector - including motor vehicles, parts, and accessories - and the basic iron and steel division, combining for a substantial negative impact. Only two divisions, food and beverages, saw positive growth, while the rest dragged down manufacturing output. The sector's weak performance in 2024 was primarily driven by declines in key sub-sectors like automotive, with motor vehicles, parts, and accessories experiencing a sharp 13% drop. However, there are hopeful signs for 2025. New vehicle sales have been on the rise, indicating potential support for automotive sector production. Additionally, GDP growth projections of around 1.9% for the year, along with stable inflation and lower interest rates, suggest a gradual improvement in aggregate demand. Factors like improved sentiment, reduced load shedding constraints, and increasing business confidence post-government unity formation are also expected to contribute to a modest recovery in manufacturing output this year and beyond. Looking at the global environment, Sithole acknowledged the challenging landscape ahead. Uncertainties like the ongoing tariff implementations by the US and global GDP growth projections of 3.3% for 2025 add to the complexity. While this growth rate is lower than pre-pandemic levels, it doesn't signal a severe global slowdown. Concerns persist around potential tariff impacts on currencies, inflation, and growth at both local and global levels. Manufacturing exports faced challenges in 2024, with weak performance in automotive and commodity exports. Despite this, the trade balance was supported by subdued domestic demand, leading to a positive trade surplus. As South Africa navigates through these challenges, Sithole remains cautiously optimistic about the manufacturing sector's prospects. While global uncertainties loom, domestic factors like rising new vehicle sales, supportive economic policies, and improving business sentiment provide a glimmer of hope for a recovery in manufacturing output.