Mariam Isa
2 October 2008
Johannesburg — MANUFACTURING activity in SA was stagnant last month, fuelling hopes that the worst may be over for the economy's second-biggest sector after five months in a row of contractions, a key survey showed yesterday.
But any recovery will be muted by a slump in the global economy, with manufacturing activity in some of SA's main trade partners stalling dramatically in the same month.
The seasonally adjusted Investec Purchasing Managers' Index (PMI) was steady at 47 index points, the same level as in August -- although any reading below 50 generally points to a contraction in output.
"In all, the Investec PMI results seem to be hinting at the bottoming out of the deterioration in manufacturing business conditions," said Mokgatla Madisha, portfolio manager at Investec Asset Management.
"However, the weakening global economic outlook poses a risk to recovery in the manufacturing sector."
Similar surveys in the UK, Europe and Asia - which were also released yesterday - painted a very bleak picture, as gloom from the global financial crisis spread.
Japanese manufacturers turned negative for the first time in five years, India's activity expanded at its weakest pace for 14 months, while Russia's also shrank.
In Europe, factory activity contracted for the fourth month in a row, with output at its weakest since the 9/11 attacks in 2001.
Britain's PMI fell to its lowest since it was launched in 1992.
The PMI surveys, which are carried out every month, measure sales orders and expectations among purchasers of supplies for factories, and are widely seen as a reliable health gauge for the sector.
The Investec PMI showed that business activity declined further from 44,4 in August to 42,6. But new sales orders picked up, rising to 45,3 from 44 while inventory levels also rose to 53,8 from 55,6.
Expectations for business conditions in six months also sent a hopeful signal, rising to 57,8 from 53,8.
"The reading is encouraging, there is a hint it may have reached bottom," said Pieter Laubscher, chief eco-nomist at the b ureau for economic research which conducts the survey for Investec.
SA's manufacturing sector, which accounts for 16% of the economy, may have benefited from a weaker rand, which makes exports more competitive and may have led to the replacement of imports with local goods, he said.
But he said: "A lot of things are happening now which will have a negative impact on SA - purchasing managers are hesitant about buying into this recovery."
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