Seifsa, Manufacturing Circle welcome rebound in PMI

2nd June 2017 By: Anine Kilian - Contributing Editor Online

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) and the Manufacturing Circle have welcomed the rebound in the Absa Purchasing Managers Index (PMI) to 51.5 index points in May, up from the 44.7 index points recorded in April. 

Seifsa senior economist Tafadzwa Chibanguza says the fact that the index has rebounded to an expansionary level is a good indication of a return to the expected level of manufacturing, relative to the underpinning dynamics in the economy.

“Although the rebound in May relative to April is positive, comparing these two months may present a false sense of exaggerated expansion because of the statistical base effects caused by the April 2017 dip,” he said.

He added that, when comparing these two months, there was a strong improvement in almost all the indices, except for the employment index.

Chibanguza highlighted the fact that the employment index decreased from 50.3 points in April to 47.4 points in May, was a telling signal of the pressures that companies still face.

“Jobless growth results from the fact that companies were in survival mode and were trying to respond to a volatile and often hostile environment without being burdened by excessive fixed costs.”

He said this was particularly true in the case of the metals and engineering sector.        

He added that a relative degree of optimism still exists in the economy, but ongoing domestic political headwinds continue to threaten this potential.

“April 2017 may have been an outlier given the fact that respondents to the April survey would have been responding on the back of the unfortunate Cabinet reshuffle and the subsequent downgrades.”

The Manufacturing Circle, meanwhile, said the May 2015 PMI demonstrated the resilience in the manufacturing sector, despite tough times.

“It seems that the sector is being buoyed by orders and by export prospects, and the outlook is mildly encouraging for the medium term. Looking at inventory, the picture is, however, more concerning in the short term,” Manufacturing Circle executive director Philippa Rodseth stated.

She added that the industry body was concerned about the latest Quarterly Labour Force Survey released by Statistics South Africa, on Thursday, which showed that unemployment climbed to 27.7% in the first quarter of this year.

“Nobody can dispute that we need more jobs for economic and social reasons, and it will require moving manufacturing up a gear. We are the engine of the South African economy, and we are prepared to lead the recovery by improving our competitiveness, attaining a supportive international trade position and by promoting the reputation of locally manufactured products,” she said.