As expected, total manufacturing output (not seasonally adjusted) grew strongly by 87.9% y/y in April, following upwardly revised growth of 5.2% y/y (previously 4.6% y/y) in March.
Worryingly, seasonally adjusted manufacturing output, which is critical for the official calculation of quarterly real GDP growth, declined by 1.2% m/m in April after monthly average growth of 0.8% between January 2021 and March 2021. Although the monthly decline in seasonally adjusted production may not have been expected amid the manufacturing PMI that remained in expansionary territory, the decline of the business activity PMI (from 56.1 points in March to 50.8 points in April) had already signalled a significant slowdown in monthly production.
At this stage, the contraction in monthly manufacturing output and the slowdown in monthly growth momentum in mining production (released earlier today) corroborate our view that quarterly real GDP growth likely moderated in 2Q20 following a better-than-expected out-turn for 1Q21.
Outlook
Overall, our near-term outlook for the manufacturing sector remains positive. The sector's growth performance should continue rebounding from a lockdown-induced lower base in 2020, and performance should benefit from easier lockdown restrictions and improving local and external demand.
The recent manufacturing PMI survey outcomes point to better monthly performance in May and over the near term. In addition, the extent to which the sector's inventories fell last year means that the sector could ramp up production to meet rising local and external demand. We are, however, more concerned about the disruptive impact of continued load-shedding, which could curtail production.
Subsector performance in April 2021
Among the larger manufacturing sub-divisions, the robust year-on-year growth in total manufacturing production was driven by the basic iron and steel, non-ferrous metal products, metal products and machinery sub-division, which grew by 160.3% y/y in April following growth of 2.6% y/y in March. Production of motor vehicles, parts and accessories and other transport equipment grew strongly, with the motor vehicles' index measuring 109.7 compared to zero in April 2020 when stringent lockdown restrictions forced vehicle manufacturers to stop production. Food and beverages production grew by 28% y/y, and petroleum, chemical products, rubber and plastic products grew by 36.2% y/y.
Figure 1: Total manufacturing production level
Source: Stats SA, FNB Economics
Figure 2: Total motor vehicle production
Source: Stats SA, FNB Economics
