Factories slip but upturn predicted

MANUFACTURING activity increased last month but at a slower pace than in June – mainly due to a significant drop in business activity, in line with a weak economy.

The seasonally adjusted Barclays purchasing managers index (PMI) fell by 1.2 index points to 52.5 last month. An above-50 reading indicates expansion in manufacturing activity.

Despite the slight drop, the level signalled that the sector experienced a reasonably strong start to the third quarter after a robust performance during the second quarter, Barclays said yesterday.

The decline in the PMI was mainly driven by a 4.8-point drop in the business activity index to 49.5.

The PMI’s leading indicator rose, suggesting output growth may pick up, according to Barclays.

The new sales orders index rose slightly to 54.4 index points, signalling improvement in demand was sustained last month.

Demand seemed to be supported by improved export performance, with some respondents still noting significant weakness in the economy.

The price index fell by almost 10 index points to 72.1 points – the lowest level since April last year. The stronger rand and lower international oil prices are offering manufacturers some input cost relief.

Purchasing managers were more optimistic about future business conditions, with the index measuring expected business conditions in six months’ time rising to 55.4 last month from 52.9 in June.

Barclays said this meant that barring unexpected disruptions to output, the sector could continue its recovery in the second half of the year. – BDlive