ECONOMY
Manufacturers labouring under rand
Posted Thu, 13 Apr 2006
Despite an increase in business confidence, the manufacturing sector is still under pressure, according to the Bureau for Economic Research's (BER) latest quarterly survey.
The University of Stellenbosch-based BER said on Wednesday that manufacturers had reported buckling foreign sales and orders, and a deceleration in production volumes for the first three months of this year.
Domestic demand remained a key driver behind their performance, despite slower growth of domestic sales and orders than in the previous quarter.
While the number of manufacturers reporting year-on-year increases in domestic sales and orders declined, the growth tempo was higher than expected.
The results also indicated that the consumer goods sector had started to significantly benefit from keen domestic demand conditions after being left in the dark for four quarters.
The BER expressed concern about manufacturers' export performance, which continued to deteriorate.
Respondents reporting year-on-year declines in export sales had increased from 24 percent to 43 percent.
The main culprit appeared to be the continued strength of the exchange rate.
Production volumes slowed significantly in the first quarter of 2006, and manufacturers continued to retrench workers, probably in an attempt to stay competitive.
The BER said that given these trends, it was surprising that manufacturing business confidence increased from 68 to 72 index points.
It seemed that manufacturers had "adjusted their confidence upwards" after more favourable conditions materialised in the first quarter than were expected.
Sapa
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