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Manufacturing on consolidation path

Cape Town - The Kagiso Purchasing Management Index (PMI) for June (51.6) indicates South African manufacturing is continuing on its consolidation path.

The Manufacturing Circle expected figures in line with previous months, namely 50.4 for April and 50.5 for May.

The slight uptick announced today is therefore welcome, according to Coenraad Bezuidenhout, executive director of the Manufacturing Circle.

Improvements in the Business Activity component for the last three months (averaging 51.7, versus 49.8 for January to March) along with the improvement in new sales orders do show improved demand.

While the Bureau for Economic Research’s analysis attributes this to improved conditions in the United States, the weaker rand and traction gained by the government’s local procurement drive may also have yielded some benefits, according to Bezuidenhout.

Flat employment expectations by the manufacturing sector for the medium term have been borne out by periodic employment stats, with some month-to-month fluctuations.

“We view the slight decline in the employment component of the index in that conext, but have to acknowledge that some manufacturers may be tempted into mechanisation, due to the relative affordability of capital and significant labour challenges faced by industry,” he said.

“Fluctuations in expected business conditions mirror the volatility of our growth and political outlook and underline the need for leadership and consensus on the economy that supports certainty and predictability for investors.”

This should be matched, according to Bezuidenhout, by a concerted effort to reduce business costs, incurred as a result of administered price increases in particular, and open markets for South African manufacturers to compete in.

- Fin24


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