Higher business confidence for the province is encouraging says BER economist Nkanyiso Hlongwe.

The Eastern Cape recorded the highest manufacturing business confidence in South Africa driven mainly by a high performing transport sector in the first quarter of 2011.

According to the Bureau for Economic Research (BER), the Eastern Cape manufacturing confidence level at 91%, is the highest of the four provinces surveyed which include Gauteng, Western Cape and KwaZulu-Natal.

"Manufacturing in the Eastern Cape has been pushed up mainly by higher vehicle sales as a result of higher real disposable income and higher wage settlements. Very low interest rates which dropped by 650 basis points since December 2008 also contributed to this trend. The repo rate is also at its lowest in 30 years at 5,5%.

"The high manufacturing business confidence levels in the Eastern Cape are also supported by an increase in domestic demand with manufacturers reporting higher domestic sales volumes," says BER economist Nkanyiso Hlongwe.

Speaking to getnews.co.za, Hlongwe says export sales are also doing well in the Eastern Cape although the manufacturing survey reflected a net majority of 94% of manufacturers surveyed reporting higher export sales compared to the previous quarter's 98%.

The survey which is done every quarter however revealed that the high manufacturing confidence in the Eastern Cape did not necessarily translate into an increase in jobs. A net majority of 7% of manufacturers reported retrenchments and layoffs in this period compared to the previous quarter where manufacturers reported an increase in the number of factory workers employed.

"This is because employers have increased the productivity of the current workforce increasing the average hours worked by individual employees before taking on more staff," explains Hlongwe.

Overall production in South Africa improved during the quarter in line with rising demand. The survey noted a decline in the stocks of raw materials and finished goods.

"It can be assumed that the decline in stocks is driven by better-than-expected demand reported by the manufacturers, suggesting that they have to increase production volumes," Hlongwe says.

Hlongwe says although export sales declined, export order sales improved notably.