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Private sector activity was subdued in July: PMI

Johannesburg - Activity in the private sector improved slightly last month, but overall business conditions remained subdued despite an uptick in employment and inventories, a survey showed on Tuesday.

Standard Bank's Purchasing Managers' Index (PMI) inched up to 49.9 in July from 49.6 in June.

"A main drag to July's PMI was the decline in new orders, which subtracted 0.1 points from the final index as it fell from expansion into contraction," said economist at Standard Bank Kuvasha Naidoo.

The index managed a brief break above the 50 mark that separates expansion from growth in May after 11 months of contraction but has fallen back again, reflecting weak economic conditions. Africa's most advanced economy shrank 1.2% in the first quarter of 2016.

A majority of the companies surveyed reported monthly falls in output and new business locally, as well as a decline in export orders.

The firms said they had seen a rise in input prices, albeit at a slower rate than in the previous month.

"Overall input prices continued to rise, but at a slower rate, driven mainly by purchase costs as the pace of staff cost increases remained sticky," said Naidoo.

Barclays BER PMI falls by 1.2 index points

The Barclays/Bureau of Economic Research (BER) PMI fell by 1.2 index points to 52.5 in July 2016, it was also announced on Tuesday.

"Readings above 50 signal an expansion in manfuacturing activity and as such today’s manufacturing sentiment print tentatively indicates a relatively firm start to the third quarter of the year," said MMI economist Sanisha Packirisamy and Herman van Papendorp, head of asset allocation at Momentum.

"The index averaged 53.5 index points in the second quarter of the year suggesting a potential rebound in manufacturing activity which declined by 0.9% in year-on-year terms in 2Q16.

"Although the business activity sub-component slipped 4.8 index points in July to 49.5 points, the new sales orders index rose to 54.4 index points, painting a promising outlook for future demand levels.

"According to the BER, demand continues to be supported by an improvement in export performance. This, together with the fact that PMI figures held up in core constituencies in the Eurozone, is a positive signal that the UK’s Brexit vote may not be that damaging for SA’s export performance going forward.

"Nevertheless, respondents remained downbeat about domestic demand suggesting little chance of a sharp reversal in gross domestic expenditure in the upcoming quarter."

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