The revised 2003 manufacturing data released by Statistics SA on Tuesday indicates that there has been a firm recovery in South Africa's manufacturing, broadly in line with that indicated by the Investec Purchasing Managers Index (PMI), according to Investec Asset Management.

On an annualised basis, manufacturing rose by close to 10% in the first quarter of 2004, consistent with all the signs of a normal, firm recovery in manufacturing, Roux said.

"From here onwards growth forecasts for the year will be revised upwards.

Investec Asset Management believes that South Africa is in line to achieve 4% growth in the second half of the year, and this data release suggests that 4% in the second half of the year is well within our reach."

Also significant, Roux said, was the fact that the level of manufacturing activity had been revised upwards by some 17% as a result of a broader survey being introduced.

"Stats SA has yet to indicate when this growth occurred. This is an important point, as it would tell us what the trend growth rate of the economy is. It is to be hoped that Stats SA will take this issue very seriously in the coming months as they prepare for the five-yearly revisions to GDP that will be published in November this year."

According to Roux, a quick 'back of the envelope' calculation suggested that trend growth would rise by at least 1% if one assumes that revisions of a similar order were applied to other parts of the private sector and that the growth occurred since 1994.

"The current trend growth rate is slightly below 3%. Revisions of this order would raise it to close to 4%."

Stats SA's new manufacturing series, which is based on a new survey running in parallel with the existing survey since the start of 2003, shows movements consistent with those from the old manufacturing series. This is the first published outcome of a strategic, systematic approach to the overhaul of Stats SA's economic statistics.

Stats SA reported that manufacturing production for the first quarter of 2004 increased by 2.3%, after seasonal adjustment, compared with the fourth quarter of 2003. Higher production was reported by 8 of the 10 manufacturing divisions.

The total value of sales of manufactured products at current prices for the first quarter of 2004 increased by 4.4% (+7.928 billion rand), after seasonal adjustment, compared with the fourth quarter of 2003. Higher manufacturing sales were reported by 7 of the 10 manufacturing divisions during this period.

Sales of manufactured products at current prices for the first quarter of 2004 were 3.4% higher than for the first quarter of 2003.

I-Net Bridge 19 May 2004