SA manufacturing production in March 2011

In March 2011, SA manufacturing production rose by a healthy 1.6% m/m (seasonally adjusted), compared with an equally solid rise of 1.7%m/m in February and 1.4%m/m in January. The March reading was well above market expectations, which was for a rise of 0.9%m/m.

On an annual basis, production was up a respectable 4.6%y/y in March 2011, but down from 5.7%y/y in February 2011. While the annual rate of change slowed in March 2011, the volume of production (on a seasonally adjusted basis) is at its highest level since October 2008 (see chart attached).

For 2010 as a whole, SA manufacturing activity grew by 4.9%y/y, which is obviously a vast improvement on the 12.9%y/y decline recorded in 2009.

During Q1 2011, manufacturing production rose by a robust 4.0%q/q (non-annualised) compared with growth of only 1.2%q/q in Q4 2010 and a decline of 1.7%q/q in Q3 2010. The strength in Q1 2011 was mainly driven by strong increases in the production of petroleum (contributing 1 percentage point to the quarterly rise), iron and steel (contributing 0.9 percentage points), basic chemicals (contributing 0.5 percentage points), and motor vehicles (contributing 0.3 percentage points). The improvement in output during Q1 2011 will certainly provide a welcome boost to the Q1 2011 GDP growth estimate.

Although manufacturing activity is well out of recession, and recorded solid growth in Q1 2011, the overall pace of recovery remains a little fragile. This fragility is due to the ending of key infrastructure projects, a dearth of private sector investment projects, the relative strength of the Rand (which makes manufactured imports far more price competitive), and ongoing economic difficulties in the Euro-area (which makes it more difficult to grow manufactured exports). It is also reflected in the fact that without the substantial growth in vehicle and petroleum production, activity levels would be fairly modest overall. Together the vehicle and petroleum sectors have accounted for almost 68% of the annual growth in manufacturing over the past year.

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