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Manufacturing business confidence tumbles to six-year low

29 Mar 2016

Manufacturing business confidence has tumbled to a six-year low mainly due to subdued domestic demand, with more than eight out of 10 manufacturers surveyed indicating they are unsatisfied with prevailing business conditions.

Machines operate at Ford’s assembly plant in Silverton, Pretoria. While manufacturing should be benefiting from the weak rand, high-cost imports, low demand and currency volatility are stifling the sector.

Image source: BDlive.co.za

The Bureau for Economic Research’s (BER) manufacturing survey, which measures confidence among producers, fell sharply from 34 points in the fourth quarter of 2015 to just 18 points in this quarter (January to March).

Low manufacturing confidence bodes ill for production, jobs in the sector and economic growth.

"Most of the headwinds faced by the sector are unlikely to reverse in the short term, which suggests that manufacturing business confidence may remain subdued over the near term," Bureau for Economic Research economist Lisette IJssel de Schepper said.

Domestic sales and order volumes declined compared with the same period last year. However, manufacturers were able to push for higher domestic selling prices, the bureau said.

Exports were also under pressure, with the export sales volume indicator declining for a second consecutive quarter despite the weak rand.

Production is also underperforming. The production volume indicator declined further in line with persistent weak demand. The slowdown in production in turn resulted in manufacturers shedding jobs.

The survey was conducted between 25 January and 1 March.

Source: Business Day

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