Manufacturing business confidence has tumbled to a six-year low‚ suggesting that output and job creation in the sector will struggle to improve significantly this year and economic growth will suffer.
Lower manufacturing output will limit economic growth, given that the sector makes up 12.5% of gross domestic product (GDP).
The government projects growth this year at 0.9%‚ almost in line with the Reserve Bank’s 0.8% forecast. This is far too low to address the high 24.5% unemployment rate.
The Bureau for Economic Research’s (BER’s) manufacturing survey, which measures confidence among producers, fell sharply to 18 points in this quarter (January to March) from 34 points in the fourth quarter of last year.
The current survey level shows that more than eight out of 10 manufacturers are dissatisfied with prevailing business conditions.
Manufacturing output and jobs are negatively affected by low global and domestic demand‚ weak commodity prices and rising input costs including for labour and electricity.
Another key indicator of activity in the manufacturing sector, the Barclays purchasing managers’ index (PMI), to be released tomorrow, is also expected to point to the problems lying ahead for output in the sector. The index was below 50 in both January and last month. A below-50 reading indicates a contraction in manufacturing activity.
The PMI March reading was also likely to remain below 50 at an estimated 48‚ Investec economist Kamilla Kaplan said.
Consumer disposable incomes were eroded by rising food and electricity prices‚ inflation and higher interest rates. The Reserve Bank monetary policy committee increased interest rates by 50 basis points in January and again by 25 basis points this month.
Manufacturers were still able to push for higher domestic selling prices despite lower sales and order volumes‚ the BER said.
This suggested that higher input prices were forcing producers to pass costs onto consumers.
The export sales volume indicator declined for a second straight quarter.
Manufacturers hit a low
Lower manufacturing output will limit economic growth, given that the sector makes up 12.5% of gross domestic product (GDP).
The government projects growth this year at 0.9%‚ almost in line with the Reserve Bank’s 0.8% forecast. This is far too low to address the high 24.5% unemployment rate.
The Bureau for Economic Research’s (BER’s) manufacturing survey, which measures confidence among producers, fell sharply to 18 points in this quarter (January to March) from 34 points in the fourth quarter of last year.
The current survey level shows that more than eight out of 10 manufacturers are dissatisfied with prevailing business conditions.
Manufacturing output and jobs are negatively affected by low global and domestic demand‚ weak commodity prices and rising input costs including for labour and electricity.
Another key indicator of activity in the manufacturing sector, the Barclays purchasing managers’ index (PMI), to be released tomorrow, is also expected to point to the problems lying ahead for output in the sector. The index was below 50 in both January and last month. A below-50 reading indicates a contraction in manufacturing activity.
The PMI March reading was also likely to remain below 50 at an estimated 48‚ Investec economist Kamilla Kaplan said.
Consumer disposable incomes were eroded by rising food and electricity prices‚ inflation and higher interest rates. The Reserve Bank monetary policy committee increased interest rates by 50 basis points in January and again by 25 basis points this month.
Manufacturers were still able to push for higher domestic selling prices despite lower sales and order volumes‚ the BER said.
This suggested that higher input prices were forcing producers to pass costs onto consumers.
The export sales volume indicator declined for a second straight quarter.
Would you like to comment on this article?
Register (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Trending Now
Latest Videos