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SA, global factory orders hit by slowdown

Johannesburg - South Africa’s purchasing managers' index (PMI) fell for the third straight month in June. It dropped to 53.9 from 55.1 in May, sponsor Kagiso Securities said on Friday.

The index has now recorded three consecutive months of decline and is at its lowest level this year, after rising from 51.7 in December last year.

“Although the level of the index suggests that the manufacturing sector is expanding, it also signals a moderation in the sector’s growth momentum. The recent trend is in line with global factory sector developments,” said Abdul Davids, head of research at Kagiso Asset Management.
 
The manufacturing production cycle tracks international factory sector developments with a couple of month’s lag. Growth in factory output slowed sharply to 0.4% year-on-year in April from 4.6%  in March.

All but one of the survey’s sub-indices lost ground in June and managers were less optimistic about future business conditions.

However, the overall PMI index - a key measure of manufacturing activity - has managed to stay above 50 since November last year.

Employment edged up slowly from 47.7 to 48.7.

Chinese manufacturing slipped to its slowest pace in 28 months in June, sapped by inflation-fighting curbs on credit and weaker overseas demand, according to surveys released on Friday.

Growth in the eurozone’s manufacturing sector lost steam last month as exports slowed to a trickle and domestic demand all but dried up, while the region’s weaker economies appear to be slipping back into recession, a key survey showed on Friday.

The Markit Eurozone Manufacturing Purchasing Managers’ Index fell to 52.0 last month from 54.6 in May, its lowest reading since December 2009, in line with an earlier flash estimate and marking the 21st month above the 50 break-even level.

Output in the sector, which drove a large part of the economic recovery, slumped to a 21-month low, with the index falling to 52.5 from May’s 55.2. The June reading was revised up slightly from a 52.4 flash reading.

More worryingly for policymakers, the data again highlighted a two-speed economy, with a more resilient Germany and France propping up a struggling periphery.
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