Factories sector ‘deep in doldrums’

2008-07-01 00:00

The latest Investec Purchasing Managers’ Index (PMI) figures show manufacturing is deep in the doldrums, with the seasonally adjusted business activity index lower than in 2003, when the sector was in recession.

The overall seasonally adjusted PMI declined 5,3 index points to 43,8 from 49,1 in May.

A level above 50 shows expansion in the sector, and below shows contraction.

“A sharp slowdown in … activity contributed … to the decline in the overall index. The seasonally adjusted business activity index fell to 38,7, lower than the readings posted in 2003 when the sector was in recession,” said André Roux, head of fixed income at Investec Asset Management.

Also, demand conditions weakened and the seasonally adjusted index of new sales orders dipped to 43, its lowest level in five years.

Pressure on input prices persisted in June. At 90,8, the PMI price index stayed above 90 for the fourth month. “While the index has softened … the persistence and level is indicative of the magnitude of the acceleration in resource prices,” he said.

The decline of the employment index to 44 points indicates a clear contraction in employment in the sector.

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