Outlook bleak for manufacturing sector as June PMI slumps

The ABSA Purchasing Managers’ Index lost 1.9 points to reach 47.9 in June, down from 49.8 points in May, according to the Bureau for Economic Research (BER), signalling a muted outlook for SA's manufacturing sector.  

"This suggests that the sector is unlikely to stage a solid recovery after output contracted on a quarter-on-quarter basis in the first quarter," said the BER in a media release. 

Before the month index was released, Investec said it expected the index to stay roughly level. 

The index - compiled by the BER and sponsored by ABSA - is based on a monthly survey that tracks economic indicators of SA's manufacturing sector. 

The BER said that one of the most disappointing results of the monthly survey was a "marked decline" in the index that tracks expected business conditions in six months' time. 

"[The business conditions] index declined for a fourth consecutive month to reach 55.7 in June. This is a staggering 23.4 points below the multi-year record high level of 79.1 recorded in February 2018 and below the average level recorded in 2017." 

The BER said several factors had damped business optimism in recent months, including fears that an uptick in demand may be short-lived, the return of load shedding, and concerns about an intensification of the trade war between the US and the rest of the world for companies in the export market. 

Most of the component indexes that make up PMI were muted. 

"All but one of the five subcomponents of the headline PMI were below the neutral 50-point mark in June – the exception being the suppliers’ deliveries index at 51.5 points," said the BER.

"The new sales orders index lost 2.4 points to reach 49.1. The downtick in demand contributed to the business activity index shedding a further 1.4 points to 45.8 in June. The employment index also declined after remaining more or less unchanged for the preceding three months."

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