Manufacturing production fell by a seasonally adjusted 3.6% month-on-month in August, chiefly on the back of protracted strikes in the broader automotive industry, where output fell a considerable 25% year-on-year.

The Nedbank Economic Unit said the “disappointing” monthly outcome contained the year-on-year increase to a weak 0.2% for August from an upwardly revised 5.5% in July and market expectations of 0.6% growth.

“Manufacturing production came out weaker than the market generally expected in August, and was mainly due to the strikes in the broader automotive industry and at both manufacturers of fully built-up vehicles and automotive parts and components,” the bank noted.

Almost every major broad manufacturing category saw a decline in output in August, with the exception of the wood and wood products, paper, publishing and printing sector and the radio, television and professional equipment sector, where production rose by 6.5% and 7.5% respectively.

Year-on-year, however, gains in the basic iron and steel, nonferrous metal products, metal products and machinery sector (3.5%); wood and wood products, paper, publishing and printing sector (6.4%); petroleum, chemical products, rubber and plastic products sector (2%); glass and nonmetallic mineral products sector (9.4%); as well as the food and beverages sector (1.7%), helped to contain the impact of the sharp drop in output in the broader automotive industry.

The motor vehicles, parts and accessories and other transport equipment division, at -25%, was a significantly negative contributor.

Meanwhile, seasonally adjusted manufacturing production for the three months ended August increased by 0.2% compared with the previous three months, with five of the ten manufacturing divisions reporting positive growth rates over this period.

The largest positive contributions to the increase of 0.2% were made by the wood and wood products, paper, publishing and printing division, with a 7.2% lift in output, and the basic iron and steel, nonferrous metal products, metal products and machinery sector, which increased production by 2.5% for the three months.

Once again, these gains were somewhat offset by a 9.6% drop in output by the motor vehicles, parts and accessories and other transport equipment division.

Looking ahead, Nedbank said the outlook for the sector remained relatively subdued, noting that it expected manufacturing production to remain weak in September.

“The Kagiso Purchasing Manager’s Index in September fell below the key 50 point level, which separates expansion from contraction, mainly reflecting the impact of the protracted strikes in the automotive components manufacturing industry, which has disrupted output throughout the automotive pipeline,” it noted.

The bank said the sector also faced subdued demand conditions and that performances by the large export-orientated industries would be contained by weak growth in the eurozone, a more measured Chinese economy and weaker international commodity prices.

“However, the weaker rand will temporarily offset some of the pressures, while, at the same time, performances among those industries focused on the domestic market will probably be undermined by softer household spending and relatively subdued fixed investment activity,” it asserted.

Nedbank added that the poor output figures for August indicated that the risk to growth prospects remained on the downside, but also suggested that a revival in exports was unlikely and, as a result, the current account deficit was not expected to significantly narrow in the short-term.

As a result, it expected the rand to remain vulnerable and the risk to the inflation outlook on the upside.

“Given these contradictory forces, the Reserve Bank’s Monetary Policy Committee will probably still opt to keep interest rates unchanged, until around the second half of next year, as this is the best way to support growth without undermining the rand or fuelling inflation too much,” the bank noted.