South African Factory Output Plunges as December Power Cuts Bite

(Bloomberg) --

Production by South African manufacturers fell the most in five-and-a-half years in December as power cuts weighed on factories’ operations.

Manufacturing output fell 5.9% from a year earlier, compared with a revised 3.2% decline in the previous month, Pretoria-based Statistics South Africa said Tuesday on its website. That’s the biggest drop since July 2014. The median estimate of eight economists was for a decrease of 3.9%.

Key Insights

• Output was hampered by the deepest power cuts yet in December, when Eskom Holdings SOC Ltd. -- generator of about 95% of the nation’s electricity -- tried to prevent the grid from collapsing. The biggest declines in production came from energy-intensive industries such as motor-vehicle, parts and transportation-equipment makers.
• The drag on factory output is likely to continue. A gauge tracking expected business conditions in six months’ time, measured in Absa Group Ltd.’s Purchasing Managers Index, showed in January that sentiment in the industry may worsen because of power shortages. That was before Eskom said rolling blackouts are likely to continue for the next 18 months.
• Total output last year was 0.9% less than 2018 and with manufacturing accounting for about 13% of gross domestic product, that doesn’t bode well for 2019 economic growth data due next month.
• The 2.8% monthly decrease in output was the biggest since April 2015.

--With assistance from Renee Bonorchis, Jacqueline Mackenzie and Pauline Bax.

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Paul Richardson

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