Global manufacturing growth to remain low in 2016

World manufacturing growth is expected to remain low in 2016 due to weakened financial support for productive activities, according to a report released on  by the United Nations Industrial Development Organisation (UNIDO).

The report states that with financial uncertainty still looming across Europe, foreign direct investment has not yet reached the 2007 pre-crisis level.Indeed, estimates from the limited available data showed that manufacturing output rose by 2.5 per cent in Africa.

South Africa, the continent’s largest manufacturer, significantly improved its growth performance to 3.3 per cent in the second quarter. Higher growth rates of 8.3 per cent and 7.6 per cent were achieved in Cameroon and Senegal.

For Nigeria however, its manufacturing sector recorded a 20 per-cent drop in capacity utilisation at the end of the second quarter of 2016, due to decline‎ primarily on the scarcity of foreign exchange for raw materials replenishment and the declining purchasing power of consumers in the country

.Apart from the scarcity of forex and declining disposable income, the sector was also plagued by long-standing negative factors that are yet to be addressed, including inadequate municipal power supply and poor access road networks.

The UNIDO report also presents growth estimates by manufacturing sectors, as developing economies maintained higher growth in the production of textiles, chemical products and fabricated metal products, while the growth performance of industrialized economies was higher in the pharmaceutical industry and in production of motor vehicles.Similarly, the production of tobacco fell for the second consecutive quarter, declining by 2.6 per cent.

According to UNIDO, world manufacturing output is expected to increase by 2.8 per cent in 2016. The current trend indicates that, in contrast to recent years, there will be no breakout from the low-growth trap in 2016. Manufacturing production is likely to rise by 1.3 per cent in industrialized countries and by 4.7 per cent in developing economies.

By the end of 2016, the growth rate performance of China, the world’s largest manufacturer, is likely to further decline from last year’s 7.1 per cent to 6.5 per cent this year.Similarly, downward growth rate trends are expected in Japan, Europe, and the United States.

The report contains expected yearly growth rate estimates for 2016, as well as observed growth rates for the second quarter of this year.According to UNIDO, lower industrial growth rates pose a challenge for the implementation of Sustainable Development Goal 9, which aims to significantly raise the share of manufacturing in the economies of developing countries. World manufacturing output rose by 2.2 per cent in the second quarter compared to the same period in the previous year.

Most of the growth was contributed by developing and emerging industrial economies where manufacturing output rose by 4.9 per cent. In industrialized countries growth was marginal at 0.2 per cent. In Europe, the uncertainty following the Brexit affected the growth rate performance in manufacturing in the second quarter of 2016, below 1.0 per cent for the first time since 2013.

Lower growth was also observed in the Russian Federation and the United States, where manufacturing output rose at the marginal rate of 1.0 per cent and 0.3 per cent respectively. In Japan, manufacturing output fell by 1.8 per cent.

Among Latin American economies, manufacturing output fell by 3.2 per cent in the second quarter, amid a continuing production decline in the region. Manufacturing output plunged by 6.7 per cent in Brazil, and by 4.2 per cent in Argentina.

Asian countries largely maintained higher growth rates. Manufacturing output rose by 5.6 per cent in Indonesia, 3.9 per cent in Malaysia and 13.5 per cent in Viet Nam. However, the growth figures showed a sudden 0.7 per cent drop in production in India.