NEW data show the second-biggest sector in the economy contracted for the second consecutive month in May‚ raising red flags for the outlook for the second quarter.
The decline in the Kagiso purchasing managers’ index (PMI) points to weak manufacturing production and economic growth in the second quarter.
Adding to the gloomy outlook yesterday was a drop in new vehicle sales.
The National Association of Automobile Manufacturers of SA said new vehicle sales in the domestic market fell 9.2% year-on-year last month.
The PMI‚ compiled by the Stellenbosch University Bureau for Economic Research‚ measures activity in manufacturing and is used as a gauge of the country’s broader economic health.
The latest Kagiso PMI results come a few days after official data showed manufacturing contracted 4.4% in the first quarter and shaved 0.7 of a percentage point off gross domestic product (GDP) growth in the first quarter.
Several factors were negatively affecting manufacturing output including a 19-week platinum mine strike‚ weak domestic demand‚ and disruptions to electricity supply.
The Kagiso PMI fell from 47.4 in April to 44.3 last month – its lowest level since August 2009.
Barclays Africa economists referred to the index’s poor performance in the first two months of the second quarter as “a big red flag” for output growth. Although the bank expected a modest 1% quarter-on-quarter seasonally adjusted and annualised recovery in real GDP in the second quarter‚ it said the latest PMI reinforced growing concern of a second quarter of negative growth. Two consecutive quarters of contracting growth mean the economy is in recession.
The business activity and employment sub-indices fell deeper into contraction territory‚ suggesting muted growth.
Chartered Institute of Purchasing and Supply Africa managing director Andre Coetzee said the platinum strike was the main reason behind the drop in business activity.
“We have a lot of manufacturers supplying into the mining sector‚” he said. “A lot of them are not getting business because of the strike and some of them are even closing down.”
The weak domestic economic growth and demand environment has meant limited employment opportunities in big sectors such as manufacturing.
The employment sub-index plunged 7.4 points to 37.2 points – its lowest level in five years.
The new sales orders sub-index rose to 44.8 index points from 43.5‚ remaining well below 50 and a reflection of weak domestic demand conditions.
One sub-index‚ however‚ reflected some good news for local producers.
Input cost pressures seem to have abated slightly as suggested by an 8.5-point improvement in the price sub-index to 70.8 last month. The rand has been firmer in recent weeks‚ reducing the costs of imported commodities.
The sub-index measuring expected business conditions in six months’ time rose to 59.6 index points from 54.2 in April.
Coetzee said this was based on purchasing managers’ expectations that the platinum strike will be resolved and that global demand will gain momentum. — BDLive
Recession ‘red flags’ mounting
The decline in the Kagiso purchasing managers’ index (PMI) points to weak manufacturing production and economic growth in the second quarter.
Adding to the gloomy outlook yesterday was a drop in new vehicle sales.
The National Association of Automobile Manufacturers of SA said new vehicle sales in the domestic market fell 9.2% year-on-year last month.
The PMI‚ compiled by the Stellenbosch University Bureau for Economic Research‚ measures activity in manufacturing and is used as a gauge of the country’s broader economic health.
The latest Kagiso PMI results come a few days after official data showed manufacturing contracted 4.4% in the first quarter and shaved 0.7 of a percentage point off gross domestic product (GDP) growth in the first quarter.
Several factors were negatively affecting manufacturing output including a 19-week platinum mine strike‚ weak domestic demand‚ and disruptions to electricity supply.
The Kagiso PMI fell from 47.4 in April to 44.3 last month – its lowest level since August 2009.
Barclays Africa economists referred to the index’s poor performance in the first two months of the second quarter as “a big red flag” for output growth. Although the bank expected a modest 1% quarter-on-quarter seasonally adjusted and annualised recovery in real GDP in the second quarter‚ it said the latest PMI reinforced growing concern of a second quarter of negative growth. Two consecutive quarters of contracting growth mean the economy is in recession.
The business activity and employment sub-indices fell deeper into contraction territory‚ suggesting muted growth.
Chartered Institute of Purchasing and Supply Africa managing director Andre Coetzee said the platinum strike was the main reason behind the drop in business activity.
“We have a lot of manufacturers supplying into the mining sector‚” he said. “A lot of them are not getting business because of the strike and some of them are even closing down.”
The weak domestic economic growth and demand environment has meant limited employment opportunities in big sectors such as manufacturing.
The employment sub-index plunged 7.4 points to 37.2 points – its lowest level in five years.
The new sales orders sub-index rose to 44.8 index points from 43.5‚ remaining well below 50 and a reflection of weak domestic demand conditions.
One sub-index‚ however‚ reflected some good news for local producers.
Input cost pressures seem to have abated slightly as suggested by an 8.5-point improvement in the price sub-index to 70.8 last month. The rand has been firmer in recent weeks‚ reducing the costs of imported commodities.
The sub-index measuring expected business conditions in six months’ time rose to 59.6 index points from 54.2 in April.
Coetzee said this was based on purchasing managers’ expectations that the platinum strike will be resolved and that global demand will gain momentum. — BDLive
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