Danger Signals from ZA Manufacturing

There have been two announcements this week about the ZA manufacturing sector, which should give us pause for thought. The first was the Manufacturing Circle’s Outlook for 2014. This sees some economic recovery in 2014: GDP growth is estimated at 2.3%, following a forecast 1.9% last year. This is far too low to have much impact on employment, and therefore must be of deep concern. Furthermore, the Circle’s own Q3 2013 survey of manufacturing business conditions revealed that 29% of employers expected to shed jobs over the next 12 months – with 7% predicting a workforce cut of more than 15% “indicating that mechanisation may now be part of the competitiveness planning of an increased number of manufacturers.” We saw a lot of strike action last year, notably in the automotive sector. One result seems to be further replacement of people by robots. A big worry.
Secondly, the Automotive Manufacturers’ grouping Naamsa, which provides impressive and timely data, announced that vehicle sales declined in December from the November level – and in the fourth quarter of 2013, total sales were down 2.6% compared with the same quarter in 2012. Nedbank’s Economic Unit had this to say: “Sales growth in early 2014 is expected to remain modest as subdued consumer confidence, which has dropped to its lowest level in almost 10 years, will weigh on volumes of passenger vehicles sold. The poor economic outlook, the weak job market, high debt levels as well as likely price increases due to the rand’s weakness are also likely to dampen demand. Sales of commercial vehicles will continue to depend on trends in private sector investment growth, which remains modest. Exports should benefit from improving global economic conditions, particularly in the Eurozone, barring any domestic supply disruptions.” So the weak rand may help exports, even with a
sluggish global economy. Hopefully some of the sales problems in the last quarter were due to supply constraints in the wake of serious and prolonged industrial action. However, the automotive sector is a flagship sector in ZA, winning massive government support. If it is in trouble, that bodes ill for the greater economy.

Tweets of the day:
Funny Tweets (@iQuoteComedy): could you please put your crying kid on vibrate
Roman Cabanac (@RomanCabanac): Has Al Gore frozen to death yet?

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