By Lehlohonolo Lehana.
South African manufacturing activity rose in July, a Purchasing Managers’ Index (PMI) survey showed on Thursday, as both domestic and global demand picked up.
The seasonally-adjusted PMI for the factory sector was at 52.4 points in July compared to 45.7 in June.
The PMI is an economic activity index based on a survey by the Bureau for Economic Research (BER). A value of 50 indicates no change in activity, a value above 50 indicates increased activity and a value below 50 indicates decreased activity.
The survey results show that both domestic and global demand picked up, filtering through to higher activity. The business activity index increased by 14.5 points to 50.8 in July. This was supported by new sales orders rising by a solid 17.5 points to 55.4.
Both these indices returned to expansionary territory for the first time in three months, following a poor performance in May and June. In these months, significant policy uncertainty remained and hurt demand. The improvements suggest that on-hold orders are now being realised and translated into better activity, Absa points out.
Furthermore, export sales increased significantly in July following four consecutive months of declines.
Supplier deliveries are, however, worsening, with the index measuring suppliers’ performance having increased from 56.1 in June to 61.9 in July.
“This may indicate that suppliers are not coping with handling the increases in demand following months of slower activity,” says Absa.
Further, it says that, worryingly, despite the uptick in production, the employment index declined slightly to 45.4 in July from 46.3 in June.
Meanwhile, the purchasing price index continued to bring good news as it declined for a fourth consecutive month, falling to 63.1 points in July from 64.5 points in June.
“This was the lowest in seven months and indicative of the continued easing of cost pressures. Petrol prices fell by about R1 a litre, with a smaller decline in diesel at the start of July, alleviating pressure on costs,” Absa states.