The Steel and Engineering Industries Federation of Southern Africa (Seifsa) is concerned about the general dip in overall business activity in the broader manufacturing sector as reflected in the composite Absa Purchasing Managers’ Index (PMI), which was released on Monday.
Seifsa economist Marique Kruger on Tuesday pointed out that the latest seasonally adjusted data captured the numbers dipping further below 50 index points, which separates expansion from contraction in manufacturing activity, with the composite PMI decreasing to 47.9 index points in June, from 49.8 index points in May.
Kruger said this was a cause for concern, given that it was the second consecutive decrease.
“When compared with April, where the manufacturing sector trended in an expansionary region, recording growth of 50.9 index points, it is clear that the business activity index is slowly deteriorating,” she warned.
This is a concern for the metals and engineering (M&E) cluster, she lamented, especially given the prevailing unsatisfactory domestic demand levels.
She added that the decline in the performance of all five PMI subindices in June relative to May was of greater concern, with all subindices trending below 50 index points.
She said that was indicative of continued underutilisation of capacity and productive efficiency by businesses.
However, Kruger noted that the weaker exchange rate was expected to continue providing leverage to business activities in the M&E cluster leading to better export volumes, thereby providing impetus for the data to eventually rebound above the 50 index point level.