Transcript Diapositiva 1 - Manufacturing Circle

Manufacturing Bulletin Q2-2011
Presentation for :
Manufacturing Circle
27 September 2011
By
Dr Iraj Abedian
Pan-African Investment & Research Services(Pty) Ltd.
Outline
 Introduction
 Overall Manufacturing Business Confidence
 Current South African Manufacturing Trends
 Manufacturing Survey Results: Q2-2011
 Rand Weakness and Manufacturing
 Concluding Remarks
Slide # 2
Introduction:
Q2-2011 Manufacturing Circle Survey
Profile of Survey Participants
Sectors
Pharmaceutical
Electrical machinery
Food & beverages
Vehicles & parts
Wood & wood products
Basic iron & steel & other
Glass, non-metallic products
Construction Materials
Textiles, clothing, footwear
Electrical and Electronics
Paper and Packaging
Slide # 3
Overall Manufacturing Business Confidence
Current South African
Manufacturing Trends
Fall in Q2-2011 Manufacturing Output
Manufacturing Output
Source: Statistics South Africa, Q2 2011 GDP
 Manufacturing activity slowed markedly in Q2-2011. Manufacturing output fell
to q/q, seasonally adjusted and annualized rate of minus 7%.
 Contributing factors include, deteriorating global economic environment and
slower domestic demand.
Manufacturing Employment in Q2-2011
Employment Trends in the Manufacturing Sector
Source: Statistics South Africa, Q2 2011 Quarterly Labour Force Survey
 Employment levels in the manufacturing sector were down 3.8% (minus 68000
jobs) in Q2 2011, driven by lower production.
Fixed Investment Remains Constrained
Manufacturing Investment
Source: South African Reserve Bank, Quarterly Bulletin, September 2011
 Growth in capital outlays moderated during the second quarter, rising by
0.6%, from 1% in Q1-2011 (on a q/q, seasonally adjusted and annualized
basis).
Manufacturing Outlook Remains Fragile
Kagiso Purchasing Manager’s Index
DATE
PMI (sa)
PMI (nsa)
Business
Activity
New Sales
Backlog of
order sales
Inventories
Purchasing
Suppliers'
commitments performance
Expected
Prices
Employment
business
Aug-10
50.7
51.4
47.9
51.9
38.8
53.5
49.5
53.0
60.6
49.5
conditions
59.6
Sep-10
48.6
53.3
45.9
49.4
38.7
50.9
52.7
49.9
62.2
48.5
58.8
Oct-10
Nov-10
49.8
52.9
56.6
59.1
48.7
54.8
51.5
56.5
39.8
42.2
56.4
51.4
51.7
57.2
50.7
50.6
56.4
61.8
44.8
47.6
60.3
64.6
Dec-10
51.7
55.1
54.5
53.2
43.8
56.2
53.1
49.8
63.1
45.0
62.5
Jan-11
Feb-11
54.6
54.8
47.8
52.0
51.0
51.6
59.6
59.0
35.0
41.4
58.9
54.7
44.4
50.0
56.5
56.1
71.3
81.7
47.8
51.6
67.1
61.3
Mar-11
57.2
54.8
59.7
62.0
45.3
59.0
52.0
55.6
88.0
46.9
58.1
Apr-11
May-11
56.4
55.1
51.8
53.2
58.4
56.8
61.1
61.0
39.2
43.8
61.5
54.5
53.8
56.8
50.4
49.6
82.9
80.0
49.0
48.7
58.1
66.7
June-11
53.9
50.8
55.2
58.0
40.3
58.8
52.6
49.0
76.0
47.7
64.3
July-11
Aug-11
44.2
46.7
42.3
47.3
35.9
46.6
48.8
44.6
43.2
38.1
48.8
52.2
45.8
45.0
52.6
52.2
75.0
75.2
39.1
43.1
59.5
53.7
sa - seasonally adjusted
nsa - not seasonally adjusted
Source: Bureau for Economic Research
 Activity is expected to remain subdued in the manufacturing sector during the
third quarter, dragged down by weaker global demand as conditions in the
global economy appear to be dreary.
 On the domestic front: the negative impact of the prolonged strike action within
the sector will drive down third quarter production.
Manufacturing Survey: Q2-2011
Demand Conditions:
Export-Orientation Profile
 The ratio of domestic sales to total sales outweighed that of exports sales
during Q2-2011, with 88% of manufactures surveyed shifting 60% or more
of their allocations to the domestic market.
Demand Conditions:
Domestic vs. Exports Sales
Supply Conditions:
Input Costs and Ratio of Components
 Input costs increased dramatically during the second quarter, with only 11% of
survey respondents recording a decrease in their cost base.
 This is in line with rising domestic inflation.
Employment Conditions
 Employment levels amongst the
manufacturers surveyed were down in
in Q2-2011, as the share of manufactures
shedding jobs by 5% or more increased.
 Availability of skills in sector remains
inadequate. According to the survey results
74% of manufacturers struggle to find
qualified personnel in the domestic labour
market.
Labour Productivity
and Regulatory Environment
 On the whole, labour productivity levels remained unchanged during
Q2-2011.
 There was a slight increase in the number of survey
respondents (from 11% in Q1 to 14% in Q2) who felt that labour
productivity levels deteriorated- owing to the start of the strike season
within the sector.
Financial Conditions
 Moderation in profit margins, owing to softer manufacturing sales growth.
 The share of respondents who recorded a profit change of 15% and
above fell from 33% in Q1-2011, down to 8% in Q2-2011.
 The debt burden eased, as the number of respondents registering a
debt to equity ratio of 65% or more, remained low.
Financial Conditions
 The cost of borrowing capital for both short-term and long-term purposes
is still low, with the majority of respondents accessing finance at JIBAR
plus 3% or less.
Rand Weakness and
Manufacturing
Rand vs. Major Currencies (Daily Close)
Source: Inet Bridge
Slide # 19
Structural Issues:
Rand Foreign Exchange Volatility
Slide # 20
Structural Issues: Reserves Remains Below the IMF
Adequacy Range –More Accumulation May Be
Needed…
Slide # 21
Structural Issues:
Rand Foreign Exchange Volatility
Manufacturing Glum: Why is South Africa’s
Global Competitiveness Eroding?
Concluding Remarks:
 Manufacturing output is expected to moderate further during
the third quarter, driven by a combination of a weaker global
economy and slower domestic demand.
 Third quarter production volumes will further be exacerbated
by the prolonged strike action within the sector, in July.
 Overall, the manufacturing sector remains vulnerable to major
structural constraints.
Thank you for your attention
Slide # 25