“The progress shows that local businesses are gradually responding to the generally improving consumer and business confidence, which is characteristic of the Ramaphosa era. Hitherto, the concern had generally been that despite improving sentiments from the start of the year, supply-side data as evidenced by lead economic indicators were still nondescript.
“The output data for the M&E cluster is encouraging, considering its significance to gross domestic product and the fact that the economy cannot entirely depend on positive sentiments to expand,” said SEIFSA Economist Marique Kruger.
The latest preliminary seasonally-adjusted production data for the M&E sector published by Statistics South Africa (Stats SA) today indicated that output improved to 10,3 percent in March 2018, on a year-on-year basis, when compared to March 2017. The performance is recorded despite a reduction in production in the broader manufacturing sector, which decreased by 1,3 percent in March 2018, compared to March 2017. Similarly, the M&E sector performed well on a month-to-month basis, registering a growth of 9,0 percent in March 2018 when compared to February 2018, in line with the broader manufacturing which increased by 1,3 percent.
“Businesses in the cluster should build on this performance by capitalizing on existing initiatives aimed at igniting domestic growth by both the public and private sectors, expand output, boost sales and margins and possibly claw back lost jobs,” Kruger said.
She added that SEIFSA expects a continuous improvement in output in the M&E sector, given an up-tick in the composite purchasing managers index (PMI), which is a lead indicator for the sector. She said the constant improvement of the business activity subindex of the PMI also provides solace to potential investors and stakeholders.
“Accordingly, higher productivity and better capacity utilization is necessary for businesses to cushion the negative effects of volatile and increasing input costs,” said Kruger.
