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Industry players expect a pick in manufacturing

by Kelvin Chiringa

Industry players have predicted an improvement in the performance of the local manufacturing sector in the coming three months; a Simonis Storm Securities market survey has shown.

According to Indileni Nanghonga, a trainee economist at the stockbroker, the survey shows that the majority of respondents (70%) continue to indicate that production levels have decreased during the last three months.

This suggests sluggish consumer spending as the economy slows.

However, the respondents affirm that the situation is set to improve in the next three months.

A drop in consumption has also hit the wholesale and retail sector which according to the Economic Association of Namibia (EAN) lost an estimated 3 607 this year.

The output of the Wholesale and retail trade sector declined by 8.2%, owing to lower vehicle sales (-24.6%), more depressed furniture sales (11.6%) and decreasing sales by supermarkets (-0.7%) in the second quarter of 2017.

 Meanwhile, the Manufacturing sector reversed its performance and recorded a positive growth of 2.9% owing to the higher production of beverages – up by 10.8% - and primary non-ferrous metals (1.4%).

As expected, meat processing declined by 0.2% compared to the same quarter 2016.

“We expect this trend to continue since beverage production is expected to continue to expand since water supply has improved,” said EAN Director Klaus Schade. 

The survey further indicates that the percentage number of respondents, reporting that the present level of finished goods and capacity utilisation are below normal, has decreased to 50% and 30% respectively.

This suggests a solid economic recovery, domestically, Simonis Storm records.

“Meanwhile, the majority of respondents do not expect capital spending, selling prices and the number of people employed to change in the coming three months,” says the survey.

Simonis Storm says, “We expect a continued solid economic recovery in the agriculture, mining, tourism and manufacturing sectors. The manufacturing sector is driven mainly by the downstream sectors of the mining sector, such as polishing of mineral resources.”

Simonis Storm thus retains its annual GDP growth forecast of 0.5% for 2017 and 2.5% for 2018.

Meanwhile, the manufacturing Purchasing Manager's Index (PMI) across all advanced economies picked up in August 2017, reflecting a steady improvement in manufacturing activity.

This is also consistent with the observed improvement in industrial production in this space, says Simonis Storm.

Alongside, PMI in emerging economies remains below 50 index points, on average, thus suggesting sluggish consumer confidence as evidenced by the weaker growth in retail.

 This is particularly pronounced in South Africa and India.