Manufacturing business confidence up to 37 says the BER

This figure of 37 was the average of the readings recorded during the previous eight quarters and an indication that confidence remained low. More than six out of 10 manufacturers were unsatisfied with current business conditions.

"Despite this‚ the survey reflected an overall improvement in the underlying activity indicators‚" BER economist Lisette IJssel de Schepper said, adding that manufacturers reported an acceleration in production volume growth compared with the previous quarter.

Domestic demand also improved. "This could suggest that import-replacing demand, due to the continued weakness of the rand exchange rate, is benefiting manufacturers‚" IJssel de Schepper said.

Producers‚ however‚ reported a slight deterioration in both export order and sales volumes during the quarter. The BER reported that these indicators remained marginally better than their respective long-term average levels and were therefore not low.

"While manufacturers did not indicate an increase in the volume of goods exported‚ they were likely still able to improve their turnover by increasing export selling prices‚" she said.

Exchange rates

The weak exchange rate was identified as the main factor that might have provided a slight competitive edge to local producers as the maintained a weaker bias since the beginning of the year.

Manufacturers also reported a sharp acceleration in the rate of increase in the average domestic selling price. As suggested by the Kagiso purchasing managers index released earlier this week‚ the BER manufacturing survey showed that producers were facing higher input costs.

The BER said the weak exchange rate probably fuelled cost increases of imported inputs as producers reported an increase in the average production cost per unit. Increases were also reported in the average unit cost of labour.

According to the BER, the rating of all of the business constraints (that were surveyed) eased somewhat compared with levels recorded during the previous quarter. Most notably‚ the indicator for the rating of the current general political climate as a constraint on business activity fell from 76 to 63.

The general political climate was nonetheless still rated as the most serious constraint on business (of those surveyed).

"After remaining at multi-decade highs for three consecutive quarters‚ it remains uncertain whether the current easing would be sustained during the next quarter‚" IJssel de Schepper warned.

Encouragingly‚ the indicator rating insufficient demand as a constraint fell to its best reading since the second quarter of 2011. "While the generally positive survey results are indicative of production growth in the third quarter‚ it is unlikely that the sector will post such a large expansion as in the second quarter‚" IJssel de Schepper added.

"This is not only due to base effects‚ but labour strife and production stoppages in the vehicle manufacturing and mining sectors are also likely to weigh on production‚" she said.