The Worst is Yet to Come for SA Manufacturing

By Editor, Sunburst Africa

 

Sunburst Africa—Johannesburg—The manufacturing sector in south Africa has been under pressure for the past four years and the pressure may continue. According to the Kagiso Purchasing managers Index (PMI) for April, activity in one of SA’s most productive sectors, manufacturing, has deteriorated to four-year lows. If the trend continues it will have devastating effects on economic growth.

The Kagiso purchasing managers index (PMI), which gauges activity in manufacturing, fell to 45.4 in April from 47.9 in March. A below-50 reading suggests activity is contracting.

The fall in the PMI was mainly driven by a four-point decline in the business activity subindex — its lowest since July 2011.

kagiso

According an Asset manager at kagiso- While the manufacturing sector seems set to contract on a quarterly basis in the first quarter of 2015 (barring a remarkably strong performance in March), the April PMI suggests that a quick recovery is unlikely. In fact, conditions could worsen further in the second quarter.

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The employment subindex remained well below the 50-point mark at 45.2 points, confirming the subdued trend in employment conditions.

The index showed that April had been a tough month for manufacturers due to the intensity of load-shedding and, to a lesser extent, the large number of public holidays.

The weak performance in manufacturing directly hampered output, and also weighed on domestic demand and likely contributed to the 6.7-point drop in the new sales orders index (currently at its lowest level since August 2009.

New sales orders and business activity subindices are the two largest subcomponents of the PMI.

The price subindex continued to rise. It lifted to 69 index points in April from 67.9 in March.

Petrol prices have started to increase on higher oil prices, adding to the cost pressures on producers.

The price subindex is likely to move upwards in the months ahead due to expected increases in petrol and diesel prices.

Purchasing managers remained pessimistic about the future. The index measuring expected business conditions in six months’ time declined for a third month in a row to 56.3 points in April.

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