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Manufacturing has ‘lacklustre’ Q4 start – Barclays PMI

Manufacturing has ‘lacklustre’ Q4 start – Barclays PMI

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1st November 2016

  

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The manufacturing industry experienced a “lacklustre” start to the fourth quarter, with the Barclays Purchasing Managers’ Index (PMI) falling by 2.6 index points to 45.9 in October, from the downwardly revised 48.5 points in September and well below the neutral 50-point mark.

The Bureau for Economic Research (BER), which compiles the PMI on behalf of index sponsor Barclays, noted on Tuesday that four of the five main PMI subcomponents had declined on a month-on-month basis in October, with only the index measuring suppliers’ performance ticking up slightly in October.

The new sales orders index fell by 2.8 points to 44.5 in October. The deterioration was despite some respondents noting improved export growth during the month.

Amid persisting weak domestic demand conditions, the business activity and employment indices also deteriorated to 43.5 and 45.1 points respectively – with both indices well below the neutral 50-point mark.

“Unfortunately, manufacturers’ sentiment towards future business conditions turned notably more pessimistic. After three months of increases, the index tracking expected business conditions in six months’ time fell by 13.2 points – the third-biggest drop on record – to 50.6 points in October.

“With global economic prospects looking up in the second half of 2016, it could be that renewed concern about the future of Finance Minister Pravin Gordhan, increased talk about a possible credit rating downgrade for South Africa at the end of the year and #FeesMustFall protests, affected manufacturers’ sentiment,” the BER noted.

It added that the lack of a recovery in domestic demand likely also weighed on expectations as the PMI leading indicator slipped further below one.

“This means that inventories outstrip sales orders, which usually does not bode well for production growth,” it explained.

Edited by Creamer Media Reporter

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