SA purchasing managers' index rises to four-month high

New sales orders rose in June as well as business activity but the industry has continued to shed jobs. (David Harrison, M&G)

New sales orders rose in June as well as business activity but the industry has continued to shed jobs. (David Harrison, M&G)

South Africa’s purchasing managers' index (PMI) rose to a four-month high in June, signaling a rebound in manufacturing, Kagiso Tiso Holdings said.

The seasonally adjusted index increased to 51.6 from 50.4 in May, Johannesburg-based Kagiso said in an emailed statement on Monday. A number above 50 indicates growth in factory output. The Bureau for Economic Research, based at the University of Stellenbosch near Cape Town, conducts the PMI survey for Kagiso.

“While the latest PMI results show that conditions improved marginally, the outlook for the sector is expected to remain challenging in an environment of muted demand and relatively high input prices,” said Abdul Davids, head of research at Kagiso.

Mining strikes and a drop in export demand from Europe has curbed growth in Africa’s largest economy, which expanded an annualised 0.9% in the first quarter, the slowest pace since a 2009 recession.
Manufacturing makes up about 15% of gross domestic product (GDP).

The index measuring new sales orders rose to 54 last month from 51.1 in May, while the business activity sub-index increased 1.6 points to 52.2, Kagiso said. The employment index dropped 2.3 points to 44.9, indicating the industry continued to shed jobs last month. A sustained recovery in demand hinges on improvement in domestic demand and better GDP growth prospects in the European Union and US economies,” Davids said.

Consumer spending grew at the slowest pace since 2009 in the first quarter, while business confidence fell in May as the threat of further mining strikes loom. Labour stoppages shaved 0.5 percentage point off GDP last year, according to the national treasury.

The Reserve Bank has limited room to adjust interest rates to respond to the slowing economy because inflation remains close to the top of its 3% to 6% target, governor Gill Marcus said last week. The bank has left its benchmark rate unchanged at 5% for a year. – Bloomberg

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