Manufacturing taking major strain

Johannesburg, Mar 2 (I-Net Bridge) - The seasonally adjusted Investec purchasing managers index (PMI) fell to 39.2 in February from the 40.7 point level in January and weaker than the lows reached in November 2008.

This comes after the index had ticked up slightly in January from the 40.1 print in December.

"While not surprising, given the very weak global economic backdrop, the February results declined yet again from the prior months and, in fact, were weaker than the record lows reached in November last year," said Mokgatla Madisha, portfolio manager at Investec Asset Management.

"After seeing some improvement in December 2008 and in January this year, business activity slowed further and continues to face extreme pressure," Madisha said.

"This view is further supported by the decline in the expected business conditions index, which declined to levels below 40 points in February, to print at 38.3. Similarly, the new sales orders decline to 31.9 points provides evidence of the weak and uncertain prospects for the manufacturing sector."

The sharp decline in input costs seen in the fourth quarter slowed in February.

"Input costs, which came off sharply in the fourth quarter last year as global commodity prices plummeted, tracked sideways in February. Rand weakness is dominating the fall in dollar prices," Madisha said. "This," he said, "is likely to have some impact on how monetary policy is being conducted over the next few months."

The continued decline in employment in the sector is seen as a "serious concern".

Over the month, the employment index fell to the 40.8 level indicating that job shedding among manufacturers continues to persist.

"We have seen a sharp decline in employment globally over the last few quarters and it is unlikely that we will be able to escape these forces. The recent trajectory certainly indicates that employment in the sector remains under intense pressure," said Madisha.

"February's results are consistent with recent data releases across the globe. The precipitous decline in final demand across economies and the sharp slowdown in trade activity continue to provide headwinds to the local manufacturing sector. Forward-looking indicators remain in negative territory, indicating a weak outlook for the sector," Madisha concluded.

The record lows mentioned are since the inception of the survey in 1999.

- I-Net Bridge