PMI shows South Africa’s manufacturing sector’s ‘in trouble’, says Manufacturing Circle

The Barclays Purchasing Manager’s Index (PMI) for December, which showed that South Africa’s manufacturing sector’s growth was “stuck”, compared with the global upswing in manufacturing activity, has sparked warnings from the Manufacturing Circle.

December’s seasonally adjusted PMI remained below the neutral 50-point level for a fifth consecutive month, declining to 46.7 index points from 48.3 in November on the back of persistently weak domestic demand.

“South Africa’s gross domestic product growth rates remain marginal, and this, in turn, negatively impacts on the demand for manufactured products,” said Manufacturing Circle executive director Philippa Rodseth.

This compared unfavourably with the upward momentum seen globally since mid last year, with the PMI readings in the US and the eurozone above the 54 point mark in December.

“[South Africa’s] manufacturing [sector] is in trouble,” the advisory body warned.

Four of the five major subcomponents of South Africa’s PMI remained below 50 points in December.

“Export-led growth may counter this trend, as local manufacturers export to a strengthening global industrial sector. One of the subcomponents of the PMI, the index of new sales orders, remained just above the neutral 50-point measure in December, supporting this scenario,” Rodseth added.

Suppliers’ performance slumped to a historic low of 40.9 in December, from 48 index points in November, which Barclays said reflected the weakness of the domestic economy and suggested that suppliers were operating “way below” capacity.

Meanwhile, the PMI’s business activity index fell for the sixth consecutive month to 46.3 in December, while the inventories index declined for a third month.

The expected business conditions dipped from 53.9 index points in November to 53.2 index points in December.

The purchasing price index remained unchanged at 65.6 points.