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) released yesterday, SEIFSA Economist Marique Kruger said.
The latest seasonally-adjusted data captured the numbers dipping further below 50, which separates expansion from contraction in manufacturing activity, with the composite PMI decreasing to 47.9 in June 2018, from 49.8 in May 2018. Ms Kruger said this was a cause for concern, given that it was the second consecutive decrease following 49.8 recorded in May 2018.
“When compared to April 2018 where the manufacturing sector trended in an expansionary region, recording 50.9 growth, it is clear that the business activity index is slowly deteriorating. This is a concern for the metals and engineering (M&E) cluster, especially given the prevailing unsatisfactory domestic demand levels,” Ms Kruger said.
She added that the decline in the performance of all five sub-indices in June relative to May was of greater concern, with all sub-indices trending below 50. She said that was indicative of continued under-utilisation of capacity and productive efficiency by businesses.
However, Ms Kruger said the weaker exchange rate was expected to continue providing leverage to business activities in the M&E cluster towards better export volumes, thereby providing impetus for the data to eventually rebound above the 50 level which separates contraction from expansion.