SA’s manufacturing sector picks up in November

JOHANNESBURG — Activity in the manufacturing sector picked up momentum in November as business activity and new sales orders rose ahead of the festive season, an index showed yesterday.

The Kagiso purchasing managers index (PMI), which gauges activity in manufacturing, rose to 53,3 in November from 50,1 in October. A reading above 50 on the Kagiso PMI suggests expansion in activity.

The level of 53,3 in November was the best since August 2013 and the fourth consecutive monthly improvement.

Kagiso Asset Management head of research Abdul Davids warned, however, that the improvement in the Kagiso PMI was due to a return to normal activity following strikes.

“The improvement in the new sales orders and business activity indices was expected given that domestic demand, mainly from the mining sector, is recovering from disruptive strikes earlier in the year which, in turn, boosts output growth,” Davids said.

“This should, therefore, be seen as a normalisation in the manufacturing sector, and not necessarily as a significant out-performance.”

Activity in manufacturing fell earlier this year due to a five-month strike at platinum mines and a month-long strike by metals and engineering workers.

The new sales orders subindex rose by 4,8 index points to 55 due to support from a continued normalisation of domestic mining demand conditions following the strike at platinum mines.

Davids said although domestic demand was improving, the global environment deteriorated over recent months, creating renewed headwinds for local manufacturers targeting the export market.

The eurozone manufacturing PMI remains just barely above the neutral 50-point mark and the Chinese preliminary figure for November came in at 50 — the weakest level in six months.

Other economic indicators suggested that these two economies, both important trading partners for SA, could continue to struggle in the near term, Kagiso said.

The business activity subindex rose substantially from 50,3 to 56 index points — its highest level since February 2012 due to improving local demand.

Davids said the average PMI for the first two months of the fourth quarter was higher than the average for the third quarter, suggesting that the recovery in the manufacturing sector was finally taking hold after a strike-ridden year.

He said manufacturers appeared to have been caught off guard by the rise in demand as evidenced by the sharp increase in the backlog of the sales orders index.

He also cautioned that the current bout of electricity supply disruptions could hamper output in December.

The price index fell sharply from 76 to 67,8 index points mainly driven by significantly lower international oil prices, resulting in lower local petrol and diesel prices.

Davids also said that lower oil prices had counteracted the upward price pressures stemming from a weak rand.

— BDLive

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