Manufacturing suffers sharp decline in June
By Sunita Menon - Jul 3rd 2017, 11:23
South African factory output suffered a sharp decline in June, judging by the Absa purchasing managers index (PMI) which showed a shock 4.8 point drop to 46.7 points.
Economists had expected the index to sink slightly from May’s 51.5 points, but not to well under 50 points, which indicates the manufacturing sector is contracting instead of growing.
The deterioration was broad based, with four of the five main subcomponents decreasing.
Absa said in a statement on Monday: "The recent volatility is probably driven, or at least exacerbated, by continued uncertainty about the outlook for the domestic economy."
"Several domestic data releases, such as the economy having entered a technical recession and business confidence plunging to recession-low levels, as well as continued uncertainty on the political front during the month, likely explain why respondents were notably more pessimistic about business conditions going forward."
Absa warned that the manufacturing sector was bracing itself for a possible strike in the steel and engineering sectors if a wage agreement was not reached soon.
The index tracking expected business conditions in six months’ time to fall to the lowest level since February 2016 from 61.4 in May to 50.0 in June. The purchasing price index declined by seven points to reach 61.3 index points in June, the lowest level since October 2016.
The June figure does not bode well for second-quarter GDP growth. A 0.5% decline in manufactory in SA dragged the economy into a technical recession in the first quarter.© BusinessLIVE MMXVII
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