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JOHANNESBURG - The ABSA/Bureau for Economic Research (BER) manufacturing PMI rose to its highest in five months in October, reaching 47.8points from the 44.9 index points recorded in September.

The PMI, however, remained stuck below the neutral 50-point mark that separates contraction from growth for the fifth consecutive month. BER economist Lisette IJssel de Schepper yesterday said that the major subcomponents increased in October compared to the previous month. IJssel de Schepper said all but the suppliers’ performance index stayed below the 50-point mark.

“The index tracking expected business conditions in six months’ time fell back to 51.2points in October from 52.4points in September. This suggests that purchasing managers still expect conditions to improve going forward,” IJssel de Schepper said. The new sales orders index increased the most, surging to 49.9points in October from 43.2points in September.

The improvement in demand supported an increase in output, with the business activity index rising 2.2points to 45points in October - the third straight increase. In line with the up-tick in output, the employment index edged up to 44.3points in October from the 44.1points registered in the previous month.

However, the employment index remaining stuck below the 50-point mark for a sixth straight month. The purchasing price index rose to 73.2points in October - the highest level since June 2016. The purchasing commitments index rose to 48.1points in October from 45.2points in September - its highest since March 2017.

John Ashbourne, an Africa economist at Capital Economics, said that despite improvements in most of the sub-indices, they almost remained below the 50-point mark, suggesting widespread weakness.

“Encouragingly, the sub-sector measuring new orders jumped from 43.2points in September to 49.9points last month, suggesting that the decline in new business deals essentially halted. This was, however, about as good as the news got,” Ashbourne said.

Macroeconomics website Trading Economics said Manufacturing PMI in South Africa averaged 51.34points from 1999 until 2017, reaching an all-time high of 64.20points in July of 2006 and a record low of 34.20points in April of 2009.

105000 jobs shed

On Tuesday, Statistics SA said the manufacturing, construction and agriculture sectors shed 105000 jobs in total in the third quarter of the year as South Africa unemployment remained stubbornly steady at 27.7percent. Manufacturing shed 50000, the construction sector lost 30000 and agriculture cut 25000.

Iraj Abedian, chief economist at Pan-African Investment, yesterday said that South Africa’s manufacturing sector’s share of the gross domestic product is still quite low relative to its emerging market economy peers.

“Local procurement plays an important catalytic role in the promotion of the local manufacturing sector, and if done in the right manner, it could help bolster the struggling sector to contribute more towards the country’s growth, as well as contributing socio-economically,” Abedian said.

- BUSINESS REPORT