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Johannesburg - South Africa's manufacturing sector does not look set for a rebound in 2009, as local and international demand for the country's goods remain depressed, says an economist.
"We are almost one year into this decline; I don't think it's going to change rapidly," said Standard Bank's senior economist Johan Botha.
He said the economy first had to pick up, "and that's unlikely to happen before the last half of this year, maybe even in the fourth quarter.
"On the export side we see that the global economy is certainly battling, so demand from that quarter is also going to be quite poor - I'm afraid we are in for a tough time."
His comments followed the release of Investec's purchasing managers' index (PMI) on Monday morning, which showed a slight increase to 40.7 in January 2009 from 40.1 in December 2008.
PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research and the Institute of Purchasing Managers in SA.
Despite the improvement, Botha said the fact that the index was still below the key reading of 50 showed the sector was still in contraction. "In fact, it's the eleventh month that it [this contraction] has happened."
"Certainly weak demand is a problem," he said, adding that this has resulted in the build-up of inventories.
"Purchasing commitments are down and new sales are down, so all of that indicates that demand is quite weak for manufacturing," he said.
The data showed that purchasing commitments fell from 41.5 in December to 36.6 in January, while new sales orders dropped from 37.5 to 33.2.
"The seasonally adjusted new sales order index declined to a record low," said Investec asset management portfolio manager Mokgatla Madisha.
The data also indicated that the economic climate was taking its toll on employment in the sector, pushing up the amount of job losses. Botha said the industry could expect further cuts.
"The numbers show that there's a decline in the index for employment, indicating there are layoffs taking place at the moment."
The employment index in the survey showed a drop from 44.7 in December 2008 to 43 in January 2009.
- Fin24.com