The FMCG sub-sector continued to outperform others, contributing 50.8% to the sector’s output in Q2-22 (vs its 49.8% contribution in Q2-21). The sub-sectors like the Cement (+4.9% y/y) performed in Q2-22, driven by improved demand and pricing power of the significant cement players. Important to highlight is that despite the sector’s slower y/y growth (3.0%) in Q2-22, the FMCG sub-sector improved y/y acceleration by 5.1% in Q2-22 vs the 4.9% growth recorded in Q2-21, which brings to limelight the resilience of FMCG companies amidst rising inflationary and FX pressures and increased production cost. We attribute the resilience of the manufacturing sector due to the pricing power held by significant players.

Looking ahead, we expect to see a sustained performance in the growth of the Food, Beverages and Tobacco sub-sectors. We anticipate increased consumer demand for FMCG-related products in H2-2022. We attributed this to the expected growth and the festive period, which will bolster overall marginal propensity to consume. On the downside, however, also, we maintain that the rising cost of energy will remain a downside in terms of production cost. In the longer term also, we anticipate the continued flat growth in Real household income, growing by a CAGR of -1.1% in the last five years, will limit output for the sector as consumer price sensitivity towards FMCG output will begin to bite. Lastly, Exchange rate shortages will continue to be a significant headwind to expansion facing the manufacturing sector.