South Africa’s manufacturing was up in April following a disappointing first quarter performance as production of some durable consumer goods and motor vehicles increased, offering a glimmer of hope after a sharp contraction in growth.
Africa most industrialised economy suffered its worst quarterly contraction in nine years in a stark reminder to investors of the huge challenge President Cyril Ramaphosa faces to deliver long term economic growth.
Manufacturing, mining as well as agriculture led the downturn in gross domestic product in the first quarter, but analysts say growth for the rest of 2018 should be positive due to a mix of investor confidence and a rebound in consumer spending.
“These numbers aren’t exciting and they don’t signal what direction the economic recovery will take. The odds have been stacked against the industry but with better policies coming through that could change,” said senior economist at Nedbank Dennis Dykes.
Manufacturing output expanded by 1.1% year-on-year in April but was down 0.6% on a monthly basis, the statistics agency said on Thursday, offering a mixed picture of the economy recovery.
On a yearly basis durable goods like furniture and motor vehicles showed growth, which are supported by lower interest rates and inflation, were up.
Consumer confidence touched an all-time high in the first quarter of 2018, as positive political and economic developments made consumers much more willing to spend. Retail sales have followed suit, rising for three months in a row in 2018.
“With the recent rates cuts you should see durable goods purchases increase. But with elections due next year and employment remaining modest you’ll see some caution creeping in,” Dykes said, referring to national polls expected in early 2019 and unemployment at a near record of 27%.