Manufacturing index back in positive territory

South African manufacturing activity swung back into positive territory in November, as business activity picked up and managers saw conditions improving further, a survey showed on Wednesday.

Sponsor Kagiso Securities said the November purchasing managers’ index (PMI) rose to 52,9 points, from 49,8 in October.

In September and October, the index was below 50, the level that marks the difference between contraction and expansion.

PMI is a leading indicator ahead of official manufacturing activity and most of its sub-indices were above the 50 level.

“Together, business activity and new sales orders are responsible for 55% of the headline PMI and were mainly responsible for the move to above 50 seen for the overall index,” Kagiso’s Theo Vorster said.

Managers were also upbeat about prospects, with the expected business conditions index up 4,3 points to 64,6, its highest level since April.

“A further encouraging development is that the purchasing managers expect the improved conditions to persist,” Vorster said.

Employment, a key component in the index, rose by nearly three points from the previous month although it was still below 50.

Unemployment remains a key challenge in Africa’s biggest economy, where 25,3% of the labour force is jobless.

Analysts say at current levels, PMI is still reflecting the struggling manufacturing sector partly hampered by a strong rand.—Reuters

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