Johannesburg, 1 August 2018 – The rebound in overall business activity in the broader manufacturing sector is encouraging and bodes well for the future, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
Commenting after the release of the latest Absa Purchasing Managers’ Index (PMI), SEIFSA Economist Marique Kruger said the results of the lead indicator for August, which provides forward-looking insight into manufacturing’s health, were encouraging.
The index improved from 47.9 percent in June 2018 to 51.5 percent in July 2018, placing the data above the neutral level of 50, which separates expansion from contraction. Ms Kruger said the improvement provided some relief following two consecutive decreases in May and June 2018, and that it was expected that it would also have a positive knock-on effect on output levels.
“The PMI data specifically provide hope and modified expectations for companies in the metals and engineering (M&E) cluster going into the month of August, especially given that all the sub-indices improved in July relative to June,” said Ms Kruger.
Ms Kruger said it was particularly encouraging that the employment sub-index improved from 46.0 percent in June to 50.8 percent in July, providing hope for an eventual improvement in the unemployment rate. She said that was important following Tuesday’s release of the Quarterly Labour Force Survey results which captured a total loss of 105 000 jobs in the manufacturing sector, which compounded the official unemployment rate to 27.2% in the second quarter of 2018.
Ms Kruger said the PMI data continued to reflect the burden of fluctuating input costs, fuel and energy costs borne by manufacturers, largely underpinned by the weaker rand.
“We welcome the data and hope for a continuous improvement in business activity in the short term, as the information provides some promising indications for the broader manufacturing sector, which has the largest indirect job creation potential,” she said.