Manufacturing production increased in November suggesting that its contribution to fourth quarter economic growth might be better than expected.
The latest figures also suggest the effects of the strikes that occurred in the third quarter of last year did not spill over into the fourth quarter by as much as expected.
Manufacturing production rose by 3.4% year-on-year (y/y) in November‚ after an upwardly revised 2.7% (2.5%) y/y increase in October‚ data released by Statistics SA on Thursday (10 January) showed.
Production rose by 2.3% on a month-on-month basis compared with an increase of 1.6% month-on-month in October.
Absa Capital economist Ilke van Zyl said: "This bodes well for GDP growth in the final quarter."
The 3.4% y/y increase in manufacturing production was mainly due to higher production in the petroleum‚ chemical products‚ rubber and plastic products; motor vehicles‚ parts and accessories and other transport equipment; furniture and "other" manufacturing groups.
Although the latest improvement in manufacturing has raised hopes‚ the sector will not be without challenges this year given the gloomy economic outlook for some of SA's main trading partners.
"Recession in the eurozone and sluggish growth elsewhere in the world will continue to undermine exports and production‚ while slower wage growth and limited employment gains will mean domestic spending is likely to grow at a moderate pace‚" Nedbank economists said.
Standard Bank economist Shireen Darmalingam said that SA manufacturers were faced with increasing competition from incentivised imports from other regions trying to make the most of the poor global economic situation.
"Incentivised imports reduce the economies of scale for domestic manufacturers‚ which ultimately affects employment and reduces growth of small businesses‚" she said.