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Political uncertainty hurts manufacturing

The ratio of manufacturers rating the current political environment as a constraint on business activity has climbed to its highest level since 1993‚ according to a survey from the Bureau for Economic Research (BER).
A detailed breakdown of its overall business confidence survey showed that although confidence in the sector improved during the fourth quarter‚ it remained low‚ reflecting in part the labour unrest which has swept through the mines.

Manufacturing is the economy's second biggest sector‚ accounting for about 15% of overall economic activity and nearly 14% of employment. It expanded by 1.2% in the third quarter of this year after contracting by 0.8% in the previous quarter.

The BER manufacturing confidence index rose by five points to 38‚ but remained well below the level of 47 index points seen in the first quarter of 2012.

The ratio of respondents who saw the political backdrop as a threat to their business rose to 73 - its highest level since the third quarter of 1993.

Manufacturers expected a decline in fixed investment levels over the coming year‚ despite an improvement in perceptions of future business conditions.

"The down-scaling of investment plans is likely due to increased uncertainty‚" said BER economist Lisette IJssel de Schepper.

Export performance remained under pressure with both export sales and order volumes well below expectations.

"However‚ producers seemed to anticipate a recovery of the global economic environment (and possibly a continuation of a relatively weaker rand exchange rate) with a net majority expecting an increase in the volume of goods exported over the year‚" IJssel de Schepper said.

Domestic demand was much stronger than expected‚ with indicators for sales and order volumes improving significantly in the fourth quarter.

Source: Business Day via I-Net Bridge


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