SOUTH African manufacturers remain upbeat about the business conditions in the coming months although supply chain disruptions could hamstring a ramp-up in production.
The first quarter Absa Manufacturing Survey released yesterday showed that overall business confidence increased by 5 points to 43 index points following 2 consecutive quarterly declines.
Absa said this first quarter manufacturing print was primarily supported by positive domestic and export sales which have been sustained over the past 4 quarters.
Absa Retail and Business Bank head of manufacturing sector Justin Schmidt, however, said there was some downside risk as the majority of the responses were received before the Russian invasion of Ukraine.
“Although the official statistics for January and February were better than expected, the possibility of renewed pressure on still-strained global supply chains, and more importantly increased prices of raw materials such as oil and agricultural commodities, were likely not considered by most respondents,” Schmidt said.
“These factors may weigh on manufacturers’ confidence due to potentially higher production costs and further supply chain disruptions.”
The quarterly survey, which covers 700 businesspeople in the manufacturing sector, was conducted by the Bureau for Economic Research (BER) at Stellenbosch University between February 9 and 28.
Schmidt said this quarter’s indicator for fixed investment levels increased by 6 points to the highest level since the fourth quarter of 2007, following an extended period of excess capacity and suppressed investment in the sector.
“This is extremely good news for the industry and shows capacity to grow into the future,” Schmidt said.
“However, despite higher output, the stock levels of finished goods relative to expected demand were still deemed as too low.”
BUSINESS REPORT ONLINE