Johannesburg - The seasonally adjusted Barclays purchasing managers’ index (PMI) collapsed to 43.3 points in November from 48.1 points in October, indicating a steep fall in output and that growth in manufacturing could be much weaker in the final quarter of the year despite the absence of load shedding.
The manufacturing Barclays PMI, released yesterday, is now at its lowest level since August 2009.
In addition, this is the first time since late 2009 that all of the PMI’s major sub-components are below the neutral 50-point mark. In China, South Africa’s biggest trading partner, the official manufacturing PMI slipped to its lowest level since August 2012 to 49.6 points, down from 49.8 points in October.
The Barclays PMI has averaged 49.1 points so far this year, suggesting the manufacturing sector contracted during this period. The Barclays/BER index said the PMI leading indicator also declined for a second consecutive month, which did not bode well for output growth.
“Expectations that the current weak demand environment will improve significantly over the near term are likely weighing on manufacturers’ willingness and ability to increase output.”
It said while supply-side constraints (mainly load shedding) had alleviated somewhat over the recent months, the impact of the drought and possible water restrictions were a key risk going forward.
Bart Stemmet, an analyst at NKC African Economics, said there were no positives to be found in the PMI.
He said even though data by Statistics SA indicated the manufacturing sector recovered strongly in the third quarter, the PMI suggested the sector would remain under pressure in the fourth quarter and for some time to come.
“While electricity supply issues were to blame for the weak performance during the first half of the year, weak demand – both locally and from abroad – is to blame for the manufacturing sector not being able to gain traction in recent months, even though the electricity situation improved since August.”
The release of the PMI comes less than a week after BER also reported local business confidence fell to a six-year low in the final quarter.
The index said the manufacturing sector was confronted by broad-based demand weakness.
The new sales order index saw the sharpest decline of the major sub-components in November, followed closely by the business activity index.
New sales orders fell by seven points to 43.5 points, while business activity slumped further to 41.4 points from 47.7 points in October. Both these indices are now at the lowest level since April.
In line with the decline in activity levels, the employment index fell by 3.3 points to 40.7 points. Lexi Ball, a spokesman for Barclays Africa, said: “Worryingly, the index measuring expected business conditions in six months’ time slumped to almost seven-year low of 43.2 index points.”
The Reserve Bank hiked the repo rate to 6.25 percent from 6 percent two weeks ago on the basis that failure to act could raise inflation risks in future.
BUSINESS REPORT