Manufacturing index slumps to four-year low
ACTIVITY in manufacturing is at a four-year low.
Manufacturing is usually one of South Africa’s most productive sectors and weak output does not bode well for economic growth.
The Kagiso purchasing managers index (PMI), which gauges activity in manufacturing, fell to 45.4 last month from 47.9 in March.
A below-50 reading suggests activity is contracting.
The fall in the PMI was mainly driven by a four-point decline in the business activity subindex, its lowest since July 2011.
“While the manufacturing sector seems set to contract on a quarterly basis in the first quarter of 2015, the April PMI suggests that a quick recovery is unlikely,” Kagiso asset management head of research Abdul Davids said.
“In fact, conditions could worsen further in the second quarter.”
The employment subindex remained well below the 50point mark at 45.2 points, confirming the subdued trend in employment conditions.
Davids said that last month had been a tough one for manufacturers due to the intensity of Eskom’s load-shedding and, to a lesser extent, the large number of public holidays.
“This not only directly hampered output, but also weighed on domestic demand and likely contributed to the 6.7-point drop in the new sales orders index [at its lowest level since August 2009],” he said.
New sales orders and business activity subindices are the two largest subcomponents of the PMI.
The price subindex continued to rise – 69 index points last month from 67.9 in March.
Petrol prices have started to increase on higher oil prices, adding to cost pressures.
The price subindex is likely to move up in the months ahead due to expected rises in fuel prices. index [at its lowest level since August 2009],” he said.
New sales orders and business activity subindices are the two largest subcomponents of the PMI.
The price subindex continued to rise – 69 index points last month from 67.9 in March.
Petrol prices have started to increase on higher oil prices, adding to cost pressures.
The price subindex is likely to move up in the months ahead due to expected rises in fuel prices.