Manufacturing output slides heavily

The ten major manufacturing sub-sectors making up the total can be divided in to three very distinct categories, namely the outperformers (19%), the plungers (31%) and the strugglers (50%).

Outperformers

The outperformers, with a weight of one-fifth in total manufacturing, included food and beverages which was up 8.6% in December, and electrical machinery, up a stunning 11.8% year-on-year.

A good agricultural year boosted food processing, while electrical machinery benefited from infrastructure spending and electricity backup needs during the year.

Plungers

The plungers, setting the overall tone, with a weight of one-third in total manufacturing, saw exceptional heavy output declines in some of their subsectors.

Steel, metal products and machinery did -21% and motor vehicles -33% during December compared to a year ago.

The remaining half of manufacturing included a wide variety of sectors, all of which struggled, recording relative modest but nonetheless definite declines in output during December ranging from -1% to -5%.

These strugglers included:

• Furniture and other manufacturing: -5%
  
• petroleum, chemicals, plastics, rubber products: -4.3%
  
• textiles and clothing: -3.4%
  
• glass and other mineral materials: -3.2%
  
• wood, paper, publishing, printing: -1%

There was a steady deterioration in manufacturing output during 4Q 2008, with especially export (steel), energy (petroleum) and durable consumer goods (cars, furniture) related industries suffering greatly.

Indeed, when excluding the outperforming sectors, the remaining 80% of manufacturing output already declined by nearly 11% year-on-year in December.

This is a major contraction, reflective of many negative cross-currents hitting our manufacturing industry, including severely strained export markets, the impact of changing energy prices and household delay of durable goods replacement because of lingering uncertainties.

Downward trend continues

The main negative trends are likely to continue for some distance into 2009, though at some point change can be expected.

The main change agents could be renewed shortening of replacement cycles under the influence of falling interest rates, the eventual positive influence of falling commodity prices in the petrochemical complex, and ultimately stabilization of our export markets.

All these turns, however, will presumably take time arriving, even as agriculture may come to provide less of a growth boost to food processing.