South Africa’s purchasing managers index (PMI) rose for the second month in a row in June, indicating that the worst of the decline in the manufacturing sector may be over although output was still weak.
Kagiso Securities, which sponsors the survey, said on Wednesday the PMI for June ticked up to 37,9 on a seasonally adjusted basis, compared with May’s 37,3.
The PMI, which measures manufacturing activity, has been below the key 50,0 level for more than a year.
”Although the May and June PMI data indicate that the worst of the factory recession may be over, the low index levels hint that positive growth is not on the cards anytime soon,” said Andre Coetzee, head of fixed income securities at Kagiso.
”Indeed, the average PMI for the second quarter was 36,9, down from 38,6 index points during the first quarter,” he said.
A downturn in the global economy has hit the manufacturing sector hard and local demand has also fallen partly because of a series of interest rate increases totalling 500 basis points between June 2006 and June 2008, largely since reversed.
The manufacturing sector shrunk by a record 22,1% in the first quarter.
Kagiso said output volumes continued to decline at a slower pace with both the seasonally adjusted business activity and seasonally adjusted sales orders indices rising from 35,1 and 35,7 to 37,9 and 38,2 respectively.
The price index rose from 45,6 to 51,7, partly on higher international oil price in June, raising doubts about the sustainability of May’s sharp input price easing, Coetzee said.
Prices at producer level have fallen, with the PPI recording -3,0% year-on-year in May, but this has not followed through to consumer prices.
Citing consumer inflation concerns, the central bank left the repo rate unchanged at 7,5% last week, pausing a monetary loosening cycle that started in December and yielded 450 basis points in rate reductions. — Reuters