However, when the trend from quarter to quarter is analysed, a much more serious picture emerges, showing a deepening crisis towards the end of 2015, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
From the beginning of 2015 (1st quarter) to the last quarter, 11 140 people lost their jobs in the sector, with the majority of them (nearly 7000) doing so in the 4th quarter alone.
The losses were widespread. On an annual basis, only the rubber, shipbuilding and non-ferrous industries showed growth, with the remaining sub-sectors showing increased job losses during the second half of 2015.
SEIFSA Chief Economist Henk Langenhoven said that expectations for job creation during 2016 are not high.
The Bureau for Economic Research manufacturing survey indicates that since 2010 no companies indicated any intention to employ more people, and the purchasing managers’ index’ (PMI) employment sub-index has been in negative territory for two years now. Further contraction is expected in metals and engineering production during 2016.
“However, the latest PMI numbers released today might have shown a glimmer of hope for the future, albeit very faintly,” Mr Langenhoven said.
The business activity sub-index improved in March by 11% on February 2016, and by 5% on March 2015. The index measuring expected business conditions in six months’ time was also up by 14% in March, when compared to February 2016.
“The significance of this improvement is that it might indicate a break in the progressively deteriorating downward trend towards the end of 2015. The index leads metals and engineering production by between 12 to 18 months and last year’s movements pointed to a delayed recovery beyond 2016. Any sign of the actual index reaching a lower turning point would indicate a turning point in the trend line somewhere in future, which in turn would indicate actual production growth,” said Mr Langenhoven.
However, sustained improvement in the business activity sub-index will be necessary to reach a lower turning point in the trend. The index for the first quarter of 2016 was 15% lower than during 2015, and on an annual basis 3,5% lower than 12 months ago.
Mr Langenhoven said that a lot will depend on growth in demand from domestic and export clients.
Although the general PMI sub-index indicating new sales orders for manufacturing as a whole has improved markedly over the last three months (+10% on average), indications from the BER quarterly manufacturing survey showed very weak domestic and export sales orders for the metals and engineering sector.
Only the fabricated metals industries indicated that their export orders for the 2nd quarter of 2016 have improved, with all the rest indicating lower export orders for the 2nd quarter. Domestic sales orders for the 2nd quarter have deteriorated for all of the subindustries in the sector.
“The metals and engineering sector is in a critical condition and any sign of improvement is eagerly awaited,” concluded Mr Langenhoven.