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06 Jan 2014 15:58
The weaker rand resulted in increased prices of materials used in the manufacturing sector. (David Harrison, M&G)
South Africa's purchasing managers' index (PMI) dropped to 50.5 for the month of December, the weakest in three months, HSBC Holdings said on Monday.
The December figure for the country's manufacturing operating conditions dropped from November's 51.6, the company said in a statement.
"The December reading was the weakest in three months," HSBC economist David Faulkner said.
The holdings company said the rise in new business was domestically driven, as client demand from foreign markets had weakened for the second time in the past three months.
More workers were hired in the private sector in December due to increased workloads. "The rate of job creation accelerated to the quickest in five months, but was modest overall," HSBC said.
South Africa's manufacturing industry showed a slight improvement in December due to less production stoppages caused by labour protests and the rand's depreciation.
The weaker rand resulted in increased prices of materials used in the sector but also protected local manufacturers from losing out to imports, manufacturing circle executive director Coenraad Bezuidenhout said in a statement.
The currency's volatility remained a risk to the industry's recovery, he said.
The bigger threat to manufacturers was the higher energy costs, particularly electricity and gas due to inefficiencies in the roll-out of infrastructure, the funding, financing and recovery of investment costs.
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