Manufacturing business confidence improved in the third quarter, with the latest Bureau for Economic Research (BER)/Absa Manufacturing Survey having risen to 30 index points, up from 23 in the second quarter.

Speaking at the release of the survey, BER economist Lisette Ijssel de Schepper said seven out of ten respondents were unsatisfied with prevailing business conditions.

“The manufacturing sector has been plagued by weak domestic demand conditions for several quarters. “However, demand seems to have worsened in the third quarter, with higher net majorities reporting a decline in domestic order and sales volumes,” she noted.

Production volumes had improved during the quarter, but insufficient demand continued to constrain the manufacturing sector.

In line with weak output growth, job creation prospects remained bleak.

De Schepper added that domestic selling price inflation had moderated somewhat during the third quarter, which pointed to increased pressure on turnover growth.

“Manufacturers reported a significant deceleration in the rate of increase in the average export selling price per unit of production. “The turnaround was likely driven by the unexpected strengthening of the rand exchange rate during the first two months of the third quarter, compared with the second quarter,” she added.

Manufacturers, however, indicated that they expect an improvement in most of the underlying activity indicators in the fourth quarter and positive investment growth over the next year.

The expectation for increased investment going forward is driven by higher planned investment in machinery and equipment as well as replacements.

Amid persisting slack capacity, investments in land, building and construction as well as additions are still expected to decline.

“The improvement in expected total investment outlays in 12 months’ time was supported by an easing in the survey indicators for constraints on investment,” De Schepper said.