The latest Absa manufacturing Purchasing Managers Index (PMI) showed the steepest contraction in manufacturing activity since October last year. The PMI fell sharply from 49.9 points in January to 46.2 points last month. The decline was attributed to rolling power cuts that hurt sentiment in the manufacturing sector in the month.

However, activity in South Africa's private sector expanded for the first time in eight months in February, as output stabilised and new orders fell at a slower pace, according to IHS Markit's PMI report. Private sector PMI rose to 50.2 in February from 49.6 in January, going over the 50 point mark that separates expansion from contraction for the first time since June 2018.

Absa’s PMI measure for employment also fell, declining from 48.3 points in the previous month to 48.1 points. However, the mining and manufacturing industries, which are among the country's largest consumers of electricity, added a combined 79 000 jobs in the fourth quarter of 2018, according to Statistics South Africa.

Steel and Engineering Industries Federation of Southern Africa economist Marique Kruger said the data highlighted challenges facing the manufacturing sector, including the metals and engineering cluster of industries. “It is more disappointing to note that the deterioration in the headline PMI was underpinned by sharp decreases in the new sales orders and business activity sub-indices,” Kruger said.

In contrast, IHS Markit economist David Owen said that the company’s latest survey showcased the resilience of South African businesses in the midst of repeated setbacks. “Output stabilised despite load-shedding from Eskom affecting a number of businesses, while employment grew as firms tapped into the pool of unemployed workers,” he said in a statement.

The IHS Markit report found that new orders fell in February, but the rate of deterioration was the slowest in eight months of declines. Despite the improvement in the headline PMI, overall demand is still falling, the report show.


Credit: https://www.seifsa.co.za/meet-the-economic-and-commercial-team/


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