Manufacturing output expanded strongly by 5.5% y/y in June
Total manufacturing output (not seasonally adjusted) expanded by 5.5% y/y in June, reflecting an acceleration from 2.4% y/y (revised from 2.5% y/y) growth in May. The outturn was better than the 3.0% y/y expansion predicted by Bloomberg consensus. Seasonally adjusted manufacturing output, which aligns with the official calculation of quarterly GDP growth, increased by 1.2% m/m after shrinking by 1.3% m/m in May. Output expanded by 2.3% q/q in 2Q23, advancing from the 1.4% quarterly expansion in 1Q23. The manufacturing sector also contributed positively to 2Q23 quarterly GDP growth, adding to the cheering momentum from the mining sector. This is encouraging and poses upside risk to our -0.1% preliminary quarterly GDP prediction for the second quarter.
Outlook
YTD growth in manufacturing output is flat (0% y/y) but indicates an improvement from the 1.2% decline during the corresponding period last year. The manufacturing sector is likely to reflect mild weakness over the 2H23, given prevailing load-shedding and logistics challenges, as well as moderating global demand. This is consistent with the latest manufacturing PMI for July, which remained in contractionary terrain (i.e., below the 50-neutral mark) for the sixth successive month and, in fact, fell to 47.3 index points from 47.6 in May. The business activity PMI fell to 38.1 in July from 48.9 in June, indicating a possible relapse in monthly manufacturing output.
Selected sector analysis
Robust output growth in the motor vehicles, parts and accessories and other transport equipment division was sustained at 19.5% y/y, up from 15.1% y/y in May. Within this division, motor vehicles output expanded strongly by 36.7% y/y after increasing by 17.3% y/y in May, while parts and accessories expanded by 23.9% y/y in June after expanding by 22.5% y/y the previous month. Output in the basic iron and steel, non-ferrous metal products, metal products and machinery division also expanded by 7.5% y/y after increasing by 6.1% y/y in May. This underscored 4.5% y/y growth in basic iron and steel products, 11.4% y/y growth in non-ferrous metal products, and a 15.0% y/y growth in other fabricated metal products. Output in the food and beverages division was up by 5.8% y/y, reflecting an acceleration from 1.3% y/y in May.
This reflected strong growth of 14.3% y/y in the meat, fish, and fruit subdivision, 23.4% y/y growth in dairy products, and 13.6% y/y growth in other food products.
Moderate growth of 2.1% y/y was recorded in the petroleum, chemical products, rubber and plastic products division, largely reflecting strong growth in petroleum products. Meanwhile, the wood and wood products, paper, publishing and printing division, shrank by 1.2% y/y, reflecting weakness in the production of paper and paper products.
