| Overall
trends: The seasonally adjusted data give the impression that manufacturing
output peaked during the March-May period. There has been no unambiguous sign of a
downturn, but the data suggest that growth has lost virtually all of its momentum. If a
downturn is about to start or has started the upswing would have been very short. It
started early in 1999 and is therefore barely more than 2 years old. For this reason and
because the economy is fundamentally sound and stable, it seems unlikely that
manufacturing output will now start to decline. The previous upwsing lasted from 1993
until the end of 1998. It must therefore be concluded that this is a temporary
interruption of the upswing, which is not unusual. Manufacturing output declined in early
1996, before resuming its longer term upward trend. |
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Fundamental influences: On
balance the fundamental drivers of the demand for manufacturing products will facilitate
further growth.
(a) It is clear that consumer demand is growing, though not strongly. Last year consumer
demand grew by 3.2%, but about half of this growth was due to exceptional items, such as
strong increases on cell phones, casino gaming and higher petrol prices, that did not
benefit manufacturing. This dis placement of traditional areas of spending is still going
on, but at a much slower pace. In other words, it is less of a negative for manufacturing.
(b) Government consumption has started to rise.
(c) Private fixed investment is growing, but seemingly quite modestly.
(e) In theory government fixed investment should pick up sharply, but this usually happens
with a long delay.
(f) There is no doubt that the weak rand will benefit manufacturing exports. At the same
time it is quite clear that the metal processing sectors, that are important exporters,
are suffering because of the slowdown in world economic growth, especially in Asia
Pacific, where the possibility of a long Japanese recession looms. |
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