Aug 01, 2012
Manufacturing index recovers, but demand remains weakBack
Africa|Kagiso Tiso Holdings|Africa|China|South Africa|United States|Contracting|Manufacturing|Manufacturing Sector|Abdul Davids
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However, Kagiso Asset Management head of research Abdul Davids said South Africa’s manufacturing sector remained under strain, owing to lower demand from key export markets.
The new sales orders index was the largest contributor, having increased by almost 6 index points to 52.2, but Davids pointed out that this result did not necessarily suggest stronger demand.
Despite higher oil and commodity prices in July, the price index continued to decline and was currently at 62.7, its lowest level since the end of 2010. “As a result, we expect Statistics South Africa’s producer price index, which has remained steady at 6.6% year-on-year for the last three consecutive months, to start moderating,” Davids said.
“This is a clear signal that conditions in the local manufacturing sector will remain weak for the foreseeable future,” Davids indicated, adding that weaker anticipated business conditions were in line with current conditions in China and the US, where the latest flash PMI readings came in at 49.5 and 51.8, respectively.
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