South African manufacturing is in a quagmire that will drag economic growth even lower.Key indicator Barclays purchasing managers’ index (PMI) on Monday showed a sixth consecutive drop last month. As inventories continue to outstrip new sales orders‚ manufacturing will be muted; this points to weak growth and more job losses. Given that manufacturing is the fourth biggest contributor to GDP this bodes ill.
At 43.5‚ the PMI was over five index points below last year’s average. Anything below 50 indicates contraction.
The drop pushed the rand over the R16/$ barrier at the weekend although it recovered late in the day.
The JSE and Shanghai Composite both closed down on the news.
China’s official PMI slipped to 49.4 from 49.7. A private survey‚ the Caixin-Markit PMI‚ showed factory activity shrinking for an 11th month.
The PMI of SA’s other leading trade partner, the eurozone, also contracted‚ though it stayed above 50.
Economist Miyelani Maluleke said growth could be less than the 0.9% estimated for this year if agriculture stayed under pressure and manufacturing stayed in line with the recent PMIs.
Of concern is that the sector does not expect conditions to improve this year.
MMI Investments economist Sanisha Packirisamy said drought‚ low commodity prices and anaemic global trade were likely to limit the contribution agriculture‚ mining and manufacturing would make to economic growth.
New sales orders fell 4.1 index points to 40.7. This reading‚ barring January 2009‚ was the lowest on record for the month‚ strongly indicating how much of an effect muted demand is having.
The employment index also fell‚ suggesting further job losses. It has been below 50 for 24 months in a row.
Rising costs will also weigh on manufacturers’ ability to employ people.
The price index rose sharply to 86 points – the highest level in almost two years – as a persistently softer rand pushed up costs of materials.
The gloomy manufacturing activity news came as the North West University School of Business and Governance on Monday released a new index showing high levels of policy uncertainty in the fourth quarter, which makes private sector companies invest less.
The sacking of Nhlanhla Nene as finance minister, negative assessments of SA by rating agencies in December‚ an interest rate hike in November‚ and lacklustre global economic growth all contributed to policy uncertainty.
President Jacob Zuma’s state of the nation address and Finance Minister Pravin Gordhan’s budget speech later this month could reduce policy uncertainty by sending a clear message that SA was getting its economic house in order‚ professor at the graduate school of business at the North West University’s school of business and governance Raymond Parsons said. — BDLive-Reuters
Manufacturing in a quagmire
Key indicator Barclays purchasing managers’ index (PMI) on Monday showed a sixth consecutive drop last month. As inventories continue to outstrip new sales orders‚ manufacturing will be muted; this points to weak growth and more job losses. Given that manufacturing is the fourth biggest contributor to GDP this bodes ill.
At 43.5‚ the PMI was over five index points below last year’s average. Anything below 50 indicates contraction.
The drop pushed the rand over the R16/$ barrier at the weekend although it recovered late in the day.
The JSE and Shanghai Composite both closed down on the news.
China’s official PMI slipped to 49.4 from 49.7. A private survey‚ the Caixin-Markit PMI‚ showed factory activity shrinking for an 11th month.
The PMI of SA’s other leading trade partner, the eurozone, also contracted‚ though it stayed above 50.
Economist Miyelani Maluleke said growth could be less than the 0.9% estimated for this year if agriculture stayed under pressure and manufacturing stayed in line with the recent PMIs.
Of concern is that the sector does not expect conditions to improve this year.
MMI Investments economist Sanisha Packirisamy said drought‚ low commodity prices and anaemic global trade were likely to limit the contribution agriculture‚ mining and manufacturing would make to economic growth.
New sales orders fell 4.1 index points to 40.7. This reading‚ barring January 2009‚ was the lowest on record for the month‚ strongly indicating how much of an effect muted demand is having.
The employment index also fell‚ suggesting further job losses. It has been below 50 for 24 months in a row.
Rising costs will also weigh on manufacturers’ ability to employ people.
The price index rose sharply to 86 points – the highest level in almost two years – as a persistently softer rand pushed up costs of materials.
The gloomy manufacturing activity news came as the North West University School of Business and Governance on Monday released a new index showing high levels of policy uncertainty in the fourth quarter, which makes private sector companies invest less.
The sacking of Nhlanhla Nene as finance minister, negative assessments of SA by rating agencies in December‚ an interest rate hike in November‚ and lacklustre global economic growth all contributed to policy uncertainty.
President Jacob Zuma’s state of the nation address and Finance Minister Pravin Gordhan’s budget speech later this month could reduce policy uncertainty by sending a clear message that SA was getting its economic house in order‚ professor at the graduate school of business at the North West University’s school of business and governance Raymond Parsons said. — BDLive-Reuters
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