By Thanda Sithole
Manufacturing output (not seasonally adjusted) increased by 0.8% y/y in October, surpassing the Reuters consensus forecast of 0.3%. This marks a rebound from September's revised contraction of 1.4% y/y (previously -0.8% y/y). However, the motor vehicles, parts, and accessories division continues to weigh on overall output, posting sustained double-digit declines. On a seasonally adjusted basis, manufacturing output rose 0.4% m/m in October, recovering from a 0.2% m/m contraction (previously flat at 0.0%) in September. This signals a slightly better start to the fourth quarter.
Outlook
The manufacturing sector remains under pressure, constrained by weak domestic demand and a challenging global environment. Despite reduced energy constraints and modest input costs (as reflected in subdued producer price inflation and lower fuel prices), year-to-date manufacturing production is down 0.4%. The leading PMI business activity indicator declined to 49 points in November from 55.6 in October, suggesting that monthly output could remain subdued. Nonetheless, the manufacturing PMI's expected business conditions index was decent at 62.3 points, indicating that manufacturers foresee modest improvements in operating conditions in the near term.
We anticipate a gradual and uneven recovery as demand strengthens, supported by easing cost-of-living pressures and a stabilising global growth environment. The anticipated rebound in private sector fixed investment from next year should support manufacturing activity.
Selected sector analysis
Seven out of ten manufacturing divisions contributed to the 0.8% y/y expansion in total manufacturing output in October. Within the major divisions:
Limiting the improvement in total manufacturing output:
