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Seifsa concerned by PMI figures

Seifsa concerned by PMI figures

Photo by Duane Daws

4th August 2015

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

  

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The state of confidence as measured by the Barclays purchasing managers’ index (PMI) in July is heavily distorted by the base effects of the instability in the South African economy, spilling over from the labour unrest in the mining and metals and engineering sectors in 2014, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) said on Tuesday.

The seasonally adjusted overall index, which stood at 51.4 points, remained unchanged from June to July, but showed a substantial 11.3% year-on-year improvement.

Seifsa chief economist Henk Langenhoven said the business activity subindex showed extreme variations. “July recorded a 3% improvement on June, and the average for the year to date was 9% higher than last year.

“July this year is 30.5% higher than the strike-hit July 2014. However, the 12-month comparison, ending July, is probably a better indication of activities; the latter was 3.3% higher than the same 12 months, ending July 2014.”

He said the distorting impact of the volatile first seven months of 2014 was evident in the year-to-date numbers, as well as the year-on-year comparisons.

“To evaluate if some normality is returning to the metals and engineering sector, comparing July with June is appropriate. Taking this approach, the PMI subindices spell out a dire situation,” he added.

This included the new sales orders, which declined by 3.7%, inventories increasing by 6%, the price index declining by 2.7% and the employment index declining by 3.7%.

Langenhoven pointed out that the figures indicated a weakening situation for the manufacturing sector generally and confirmed similar observed patterns within the metals and engineering sector.

“It is perplexing that the business activity, purchasing commitment and expected business activity subindices are improving slightly,” he said.

These PMI indicators, therefore, did not change Seifsa’s view that tough times lie ahead for the remainder of this year.

It believed that the production numbers to be released shortly by Statistics South Africa would give some indication of the actual, current economic activity.

“Nevertheless, the anecdotal evidence from the metals and engineering sector is very concerning,” Langenhoven highlighted.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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