PMI rises but fear remains for factories

Absa’s monthly purchasing managers index (PMI) came in better than expected in October but shows the manufacturing sector was still in contractionary terrain and provided little impetus for growth. It came in at 47.8 compared with economists’ consensus forecast of 45.9.

Absa’s monthly purchasing managers’ index (PMI) came in slightly better than expected in October but shows the manufacturing sector was still in contractionary terrain and provided little impetus for growth.

It came in at 47.8 compared with economists’ consensus forecast of 45.9.

The 50 level separates a contraction of manufacturing activity from expansion, and analysts were expecting an improvement from September’s 45.6, mainly on the back of recent improved vehicle sales numbers, among other items.

The unemployment figures from Statistics SA on Tuesday showed that manufacturing shed 50,000 jobs in the third quarter. While economists forecast growth in the sector to be stronger than the PMI anticipated in the third quarter, the prospects for the coming quarters look grim.

Manufacturing Circle executive director Philippa Rodseth said manufacturing remained the engine of job-rich growth for the economy, but growth needed to be sustained. “We will be launching our Map to a Million advocacy document before the end of this calendar year, which motivates that 1-million direct jobs in manufacturing can be created over a 10-year period with a coherent programme of industry interventions and government support to increase investment in the sector.”

The South African Federation of Trade Unions said: “These are the sectors which ought to be creating wealth and driving the economy but are, in fact, contracting at an alarming rate and leading to a job-loss bloodbath.”

NKC economist Gerrit van Rooyen said: “We do not expect to see a major improvement in business conditions in the manufacturing sector during the rest of 2017. However, there are signs of a modest economic domestic recovery.”