The seasonally adjusted Barclays Purchasing Managers’ Index (PMI) rose to 53.7 points in June, the fourth consecutive month above the neutral 50-point mark and up from the 51.9 points recorded in May.

Barclays noted that this was an encouraging sign that conditions in the factory sector  may be improving after a lacklustre 2015 and a slow start to this year.

“The improvement in key manufacturing PMI’s in recent months is encouraging and shows some welcome stability in a sector which basically continues to face recessionary-type conditions,” said BNP Paribas Cadiz Securities economist Jeffrey Schultz.

He cautioned, however, that the weak demand environment both locally and globally, was likely to continue keeping a lid on manufacturing activity this year, not to mention the risks of strike action in quarter three in the metals, engineering and automotive sectors.

The solid performance of the Barclays PMI was supported by all five major subcomponents coming in above 50 points.

Stronger demand, according to some respondents driven by improved exports, helped lift production higher.

As a result, the new sales orders and business activity indices rose to just above 54 index points.

“However, it remains  to be seen whether this will be sustained. Domestic demand remains  weak and exports  could come under renewed pressure due to weaker UK and Eurozone growth  in a post-Brexit world,” said Barclays.

A few respondents indicated that demand was supported by clients stocking up in anticipation of possible supply disruptions if upcoming wage negotiations in the automotive sector resulted in labour unrest in the third quarter. 

This suggested that any improvement in domestic demand may have been temporary.

The price index ticked up for a second straight month to 81.4 points from 80.1 previously.

Despite the recent  upward move, the average  for the second quarter was more than  eight points below the first-quarter average.

This corresponded to the official Producer Price Index which also suggested a slight moderation in final manufactured goods’ inflation in the second quarter. 

Through  the remainder of the year, upward price pressure could intensify as a sustained weak rand and higher electricity and fuel prices pushed up manufacturers’ costs.

This may have contributed to purchasing managers being less upbeat about  expected business conditions  in six months’ time.

This index fell to 52.9 from 54.1 in May  but still suggesting that conditions are expected to improve going forward.

However, high inventory levels pushed the PMI leading indicator back below one for the first time since January.