November’s manufacturing confidence was 6,5% higher than that in October 2014, and 2% better than in November 2013. The average decline since the beginning of 2014 and over a full 12-month period is now only 4%, progressively better than over the last few months.
SEIFSA Chief Economist Henk Langenhoven said that the trend in the level and rate of change of the business activity sub-index seemed to have bottomed. The index leads production trends in metals and engineering by 12 to 18 months.
However, Mr Langenhoven said that this was very tentative:
- It seemed as if July 2014 recorded the lowest turning point, with steady improvement since then. November improved by 11%, when compared to a half a percent decline in October.
- The year-to-date, 11-month and 12-month readings are now only 6% lower than during the same periods earlier. This also points to an improvement from a 9% decline previously.
- The month of November 2014 is now 4,% higher than 2013 (against a 7% decline when October is compared between the two years).
Mr Langenhoven advised caution owing to the fact that improvement seemed to be entirely linked to the “bounce back” in domestic activity after the strikes. Many contradictions also emerged from the sub-indices, such as:
- The employment index improved by 4,6% in November, but hardly moved over the 11 months.
- New sales orders increased by 9,5% in November, but declined by 8% over 11 months.
- The order backlog increased by 21% in November, but only 6,5% over 11 months.The purchasing commitments improved by 12% in November, but declined by 5% over 11 months.
- Expected business conditions in 12 months declined by 16% in November, and are 15% lower than in November 2013.
International demand for South African exports was also soft and was expected to deteriorate judged by the weak confidence reflected in purchasing managers’ indices around the world.
Mr Langenhoven said that the most positive windfall in terms of cost pressures was the lower and seemingly falling oil price, reflected in an 11% drop in the PMI price sub-index, compared to October and to November 2013.
“With these tentative confidence trends, SEIFSA stands by its earlier conclusion that the middle of 2015 might see stronger production patterns in the metals and engineering sector,” Mr Langenhoven concluded.