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Johannesburg – A contraction in manufacturing production is likely, according to an analyst.
The Purchasing Manager’s Index (PMI) for June, which was released on Monday dipped to 46.7, from 51.5 reported in May.
The PMI averaged below the neutral 50 mark in the second quarter of 2017. This suggests a possible contraction in actual manufacturing production, explained Investec economist, Kamilla Kaplan.
“Downturns in business activity and new sales orders were key contributing factors to the overall deterioration in the sector’s performance in June,” she said.
Further lower domestic demand have also constrained production levels. “The June survey also reflected less optimism with regard to exports.”
For the second quarter as a whole, the PMI averaged 47.6 compared to 51.9 in the first quarter of the year. This suggests that actual manufacturing production may have contracted, and detracted from GDP, for the fourth consecutive quarter.
Data from Statistics South Africa (Stats SA) on manufacturing production released in June showed lower production in manufacturing contributed 0.5% to the 0.7% contraction in GDP, Fin24 reported.
READ: More bad news for manufacturing in SA
Manufacturing declined 3.7% for the first quarter of the year.
However, the Producer Price Index for May 2017 showed that factory prices were on the up. The annual PPI was at 4.8%. Month-on-month the PPI was up 0.5%.
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