South Africa’s Kagiso manufacturing PMI recovers to 46.6 in June

By bne IntelliNews July 1, 2014

South Africa’s seasonally adjusted Purchasing Managers’ Index (PMI) for the manufacturing industry increased by 2.3 points to 46.6 in June, after moving lower for three consecutive months, but remained below the 50 mark that separates contraction from expansion, Kagiso Tiso Holdings, which sponsors the survey conducted by the Bureau for Economic Research (BER) and CIPS Africa, said in a statement.

The average PMI for the second quarter reached 46.1, also in the area that signals contraction and below the first quarter’s average of 50.6. The data suggests that manufacturing production remained under pressure in Q2 after shrinking 4.4% q/q in Q1 2014 and contributing -0.7pps to the 0.6% total economic output contraction.

Compared internationally, South Africa’s economy continued to underperform, as PMI surveys showed improvements in the US and China, while the Eurozone, although declining, remained in the expansion zone above 50.

The main driver behind the slight recovery in South Africa’s PMI in June was a sharp increase, by 12.1 points, in the employment index. However, May’s reading was relatively low compared to recent levels, suggesting that the index returned to more normal levels, rather than indicating a fundamental improvement in the job market.

On the negative side, both the new sales orders and business activity sub-indices fell further with the continuation of the platinum mining strike during most of June, weighing on the already weak domestic demand environment. The slow but steady ramping-up of production after the strike was resolved in late June should support demand for some of the manufacturing sub-sectors in the coming months, Kagiso said.

The price sub-index rose by 3.0 points to 73.8 probably due to a weakening of the rand, but remained significantly below the average reading for of 92.5 for Q1.

Despite ongoing tough conditions, respondents remained optimistic about an improvement in expected business conditions in six months’ time. The PMI leading indicator (the ratio between new sales orders and inventories) fell further below 1.0, not boding well for future production growth.

South Africa’s seasonally-adjusted whole economy Purchasing Managers’ Index (PMI) for May, compiled by Markit on behalf of HSBC, is due for release on July 3.

Kagiso Purchasing Managers Index Jun-14 May-14 Apr-14 Mar-14 Feb-14 Jan-14
PMI, seasonally adjusted 46.6 44.3 47.4 50.3 51.7 49.9
PMI, not seasonally adjusted 43.0 44 46.0 51.3 52.4 45.3
PMI components:            
Business activity 39.5 42.5 48.5 51.0 48.4 48.0
New sales orders 43.9 44.8 43.5 46.6 53.4 50.2
Backlog of sales orders 35.5 32.7 41.0 44.9 45.8 38.8
Inventories 58.8 50.1 52.5 53.7 59.6 53.9
Purchasing commitments 39.0 44 44.0 51.9 49.3 48.3
Expected business conditions 58.3 59.6 54.2 54.5 55.7 61.4
Suppliers’ performance 52.4 52.3 53.9 52.5 53.1 48.8
Prices 73.8 70.8 79.3 93.0 95.1 89.3
Employment 49.3 37.2 44.6 51.8 48.2 50.7
Source: Kagiso Tiso            

Related Articles

PetroSA, Rosgeo sign $400mn oil and gas exploration agreement for South Africa

South Africa's national oil company PetroSA and Rosgeo, the geological exploration company of the Russian Federation, have signed an agreement on a $400mn oil and gas development project in South ... more

South Africa’s MTN to invest $350mn in Iranian broadband

South Africa’s MTN said it has agreed, on a non-binding and preliminary basis, to invest an initial $350mn into Iranian fixed broadband provider Iranian Net. The investment will give ... more

South Africa receives another downgrade to junk

Fitch Ratings on April 7 downgraded South Africa to junk status following the removal of Pravin Gordhan as finance minister and the enusing political crisis. Fitch's downgrade to 'BB+' ... more

Dismiss