R/€ = 15.26Change: -0.01
R/$ = 14.41Change: -0.03
Au 1057.95 $/ozChange: 0.07
Pt 835.50 $/ozChange: 0.00
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Jul 02, 2012

Manufacturing index slumps amid export gloom, domestic slowdown

Engineering|Efficient Group|Export|Industrial|Mining|Europe|China|Local Manufacturing Sector|Manufacturing|Manufacturing Sector|Product|Service|Abdul Davids|Coenraad Bezuidenhout|Kagiso|Merina Willemse
© Reuse this

After a strong start to the year, the seasonally adjusted Kagiso Purchasing Managers Index (PMI) fell to 48.2 in the second quarter, the lowest since August 2011, sponsor Kagiso Tiso Holdings said on Monday.

The domestic PMI moderated in June, losing 5.4 index points, which dampened the outlook for overall gross domestic product growth in the second quarter.

Kagiso head of research Abdul Davids said the state of the local manufacturing sector appeared to be more in line with its key export markets, such as Europe and China.

“In addition to weaker external demand, the latest figures indicate a sustained and worsening slowdown in domestic demand, as the new sales orders index, the largest weighted subindex, fell by 5.2 points to reach a level of 46.5,” he explained.

Efficient Group economist Merina Willemse told Engineering News Online that although the local slowdown could be attributed to declining demand globally, the fact that local businesses were still struggling to pay off debt, also played a role.

“Manufacturing is not going to do very well, last year we saw an average growth of 2.2% to 2.3% and this year it is the same. However, with no real stimuli coming from overseas it might be worse. Even if there is growth in overseas economies, it will be slow,” she indicated.

Kagiso stated that there was nothing in the June numbers to suggest a quick turnaround in the fortunes of the manufacturing sector, as almost all the key subindices posted meaningful losses.

The business activity index was the hardest hit, registering a fall of 9 index points to 47 points, the lowest level since mid-2011 when industrial action weighed heavily on factory sector output.

The PMI leading indicator, measured as the ratio between new sales orders and inventories, remained well below 1 at 0.85.

The index measuring expected business conditions in six months’ time declined by 1.6 points to 57.4.

The PMI employment index eased back below 50 to 46.8, suggesting that the May jump to 53 was an outlier, rather than the start of an improved trend for factory sector employment.

“The fall back below 50 does not necessarily imply that manufacturers are shedding jobs…the PMI continues to reflect a sector that is not in a position to increase employment on any grand scale,” Kagiso warned.

Manufacturing Circle executive director Coenraad Bezuidenhout said that if domestic manufacturing was to protect, or even grow the employment it currently offered, a review of monetary policy to support a more competitive exchange rate was overdue and that “urgent action” was required to level the playing fields in respect of trade.

He told Engineering News Online it was also of great importance that local procurement efforts gained momentum and that the South African consumer was made to realise the importance of buying local to support job creation and increase revenue for service delivery.

Meanwhile, input cost pressures moderated significantly, with the PMI price index losing 8.5 index points to reach 65.1. The continued decline in the oil price and other raw material prices seemed to have outweighed the impact of the rand exchange rate, which continued to trade at weaker levels versus the US dollar.

Actual producer price inflation moderated from a peak of 10.6% year-on-year in October 2011 to 6.6% during April and May.

Willemse attributed the drop in cost pressures to globally declining resource prices.

“Generally this is a good thing, because it means manufacturers are going to produce cheaper and prices might feed through to the consumer at a lower level, therefore helping us to keep inflation lower. But lowering commodity prices are also a clear indication that the economy is really struggling,” she pointed out.

However, Willemse maintained that although the latest numbers were disappointing, it was still relatively higher than that of most other developing and developed markets.

“The manufacturing industry, as a whole, is also on a better foot than the mining industry,” she stated.

Bezuidenhout said the drop in global demand not only affected South African manufacturers in terms of slowing export orders, but also in terms of the proliferation of unfairly incentivised imports being pushed onto the local market, particularly from South East Asia, to compensate for declining demand elsewhere.

“This would explain the slowdown in domestic demand indicated by the PMI,” he noted, adding that Kagiso’s finding that easing cost pressures had kept price inflation in check concurred with the Manufacturing Circle’s contention that a more competitive rand held benefits for South African manufacturing and the economy as a whole.

“This was equally evident in the final quarter of 2011, when a sustained weaker rand saw the manufacturing sector gaining strength domestically,” he said.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
Latest News
French conglomerate Bollore may have to halt work on the Niger to Benin section of its giant West Africa rail project after a rival company won a court order to stop it going ahead. The dispute concerns rival rail schemes in the area.
A week ahead of the second annual gathering of the Forum on China–Africa Cooperation (Focac), in Johannesburg, the JSE is rolling out the proverbial red carpet for Chinese investors looking to Africa’s largest bourse for possible investment opportunities, calling...
The South African National Roads Agency Limited (Sanral) applied for leave to appeal on Friday against the Western Cape High Court judgment that set aside the approvals that would enable it to toll sections of the N1 and N2 freeways in Cape Town. This prompted the...
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
The BMW Group will invest R6-billion at BMW Group South Africa’s (BMW SA’s) Rosslyn plant to produce the next-generation X3 sports-activity vehicle (SAV) for the local and export markets. Rosslyn will continue production of the current 3 Series through its lifecycle,...
The lack of consequences for poor performance and transgressions on the part of contractors remains a significant hurdle to tackling South Africa’s service delivery challenges, delegates heard at the Consulting Engineers South Africa Infrastructure Indaba, on...
City of Ekurhuleni executive mayor Mondli Gungubele earlier this month officially named the city’s bus rapid transit (BRT) system, Harambee.
NICK CHRISTODOULOU As about 58% of data stored by organisations is dark, they must identify this dark data to expose risks and valuable information
About 58% of unstructured data stored by companies is dark data, which means that the value or regulatory importance of the data has not been determined. Subsequently, most of the stored data add costs, rather than increasing revenue or reduce regulatory risks, says...
BRIAN VERWEY Effective management, review and administration of non-core elements can improve business operations and increase revenue and decrease unforeseen risks
Effective logistics, import/export and manufacturing consulting services require detailed industry knowledge and experience, but can add significant value to these industries by providing expert advice on various technical elements in their value chains, says...
Alert Close
Embed Code Close
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96