Total manufacturing output (not seasonally adjusted) contracted by a shallow 1.1% y/y in March, following a downwardly revised 5.6% y/y contraction (previously 5.2% y/y contraction) in February.
The outcome was better than the Bloomberg consensus prediction of a more resounding 5.8% y/y contraction. Encouragingly, seasonally adjusted manufacturing output rebounded strongly, posting 4.0% m/m in March after declining by 1.3% m/m in February.
The PMI business activity index measured 48.1 points in March from 45.5 points in February, indicating that monthly output was expected to improve but remain in contraction due to hard power shortages.
In contrast, the stronger-than-expected monthly increase in output reflects the dynamic impact of load-shedding on the economy and adds to forecast volatility.
Manufacturing output grew by 1.4% q/q in 1Q23, following a quarterly contraction of 1.5% in 4Q22.
This data, alongside mining production published earlier, suggests that the economic growth outcome may have been marginally better than previously envisaged.
We will await the rest of the high-frequency data (trade and tourism-related data, as well as transportation) over the next two weeks before finalising our 1Q23 real GDP estimate.
Outlook
Year-to-date (January to March), manufacturing output is down by 3.6% compared to the corresponding period last year, primarily dragged down by the petroleum, chemical products, rubber and plastic products division and, to some extent, the basic iron and steel, non-ferrous metal products, metal products and machinery division. We maintain our view that the outlook for the manufacturing sector remains precarious as hard power shortages and transport logistic challenges persist. Weakening domestic and external demand should also weigh on manufacturing activity this year. Manufacturing capacity utilisation fell to 77.9% at the end of March from 79.3% at the end of December 2022, mainly reflecting the impact of insufficient domestic demand and the aforementioned disruptions.
Selected sector analysis
The annual decline in total manufacturing production reflected extended weakness in the petroleum, chemical products, rubber and plastic products division, which declined by 8.8% y/y in March.
This is consistent with the reduced domestic refinery capacity.
Growth weakness was recorded in other minor divisions, including textiles, clothing, leather and footwear; glass and non-metallic mineral products; electrical machinery; radio, TV and communication apparatus, professional equipment, as well as furniture and other manufacturing.
The extent of the annual decline in output was limited by positive growth in the following major divisions: food and beverages grew by 5.7% y/y, after declining by 6.4% y/y in February; motor vehicles, parts and accessories and other transport equipment division increased by 5.6% y/y, up from 1.0% y/y in February; basic iron and steel, non-ferrous metal products, metal products and machinery division grew mildly by 0.1% y/y, after contracting by an annual average of 5.0% y/y over the prior three months; and wood and wood products, paper, publishing and printing also posted mild growth of 0.2% y/y, after contracting by an annual average of 4.6% y/y over the prior six months.
