South Africa’s manufacturing production capacity is “underused” as aresult of of a lack of domestic demand, Manufac-turing Circle executive director Coenraad Bezuidenhout says, noting the industry’s marginal production growth during June.

Statistics South Africa (Stats SA) reports that the growth in manufacturing production slowed to 0.4% year-on-year in June, from a downwardly revised 2.1% in May.

The agency attributes the 0.4% rise to the 6.4% higher production in the basic iron and steel, nonferrous metal products, metal products and machinery sector, which contributed 1.3 percentage points; the food and beverages sector, with growth of 4.2% and contributing 0.9 of a percentage point; and the textiles, clothing, leather and footwear sector, with growth of 6.1% and contributing 0.2 of a percentage point.

However, the petroleum, chemical products, rubber and plastic products division dragged down the month’s growth, with a significant negative contribution of –3.9% and –1 percent-age point.

As the petroleum and chemical products subsector, which was weighed down by weaker commodity prices and demand conditions, carries a weighting of 25.1%, this translates into a reduction of 1% in headline manufacturing production,” Investec explains.

Meanwhile, Stats SA says seasonally adjusted manufacturing production for the second quarter increased by 3.1%, compared with the first quarter.

Eight of the ten manufacturing divisions reported positive growth rates over this period.

“. . . the manufacturing sector cannot be considered out of the woods yet, as the sector will continue to face subdued demand conditions against elevated cost pressures, such as rising electricity, labour and transport and logistics costs,” Nedbank notes in a flash comment to clients.

The banking group adds that, in the large export-orientated industries, output growth will be contained by the recession in the eurozone, a more measured Chinese economy and weaker international commodity prices.

These manufacturing production figures, together with the weak mining production data, also released on August 8, highlight that production and exports remain under pressure, which will negatively impact on growth.