Johannesburg - The Kagiso Purchasing Managers' Index (PMI)
declined by 2.1 points in December to 47.4, according to the latest figures
released on Wednesday.
This was the fourth consecutive month of contraction, a
trend last observed during the 2008/2009 recession.
"This sharp decline comes amid bleak employment
dynamics within the manufacturing sector and adverse sentiment towards labour,
following various strikes in the second half of 2012," said Abdul Davids,
head of research at Kagiso Asset Management.
The downward trend was largely due to the fact that the
employment index had plummeted by 7.4 points to 44.7 in December.
The Kagiso PMI measures business conditions in the
manufacturing sector. Below 50 indicates contraction in the manufacturing
sector, above 50 shows expansion.
According to Statistics SA's quarterly employment figures,
in the third quarter of 2012 employment growth in the manufacturing sector
remained flat on a quarter-on-quarter basis and lower (by 4 000 workers) when
compared to the previous year.
Davids said that since the PMI employment index had been
volatile in the past, more data was required before a conclusive outlook on
employment prospects within the sector could be reached.
However, the production front was encouraging as the
Business Activity Index gained 1.4 points to reach 47.3.
Davids said the sustainability of this increase was unclear.
"Despite increased production, demand for manufactured
goods remained weak during December, as evidenced by the 2.8 point decline in
the new sales orders index," he said.
At 44.9 new sales orders were at their lowest level since
On inflation, the PMI continued to suggest elevated input
cost pressures, with the price index stabilising at a level of 79.7.
He said cost pressures from increasing electricity and fuel
prices and rising wage demands were placing significant strain on manufacturers
who were struggling to compete globally.
"As a result, conditions within the local manufacturing
sector are expected to remain challenging in the year ahead."