Footy fuels fall in manufacturing

5 July 2010

6 July 2010 | Paul Snell

The World Cup is partly to blame for the first decline in the South African Purchasing Managers’ Index (PMI) since October.

The survey of buyers by Kagiso, which measures economic activity in manufacturing, recorded 48.4 in June. This was the first time it has been below the 50-mark – which indicates contraction in the sector – since last year. Growth has been slowing in recent months, and represents a significant drop on the peak in February of 60.4.

The report said reduced working hours, and people taking time off to watch the football, could explain the decline in business activity, which fell to 45.2. The drop is at odds with global PMI results, which show manufacturing recovering.

Staff levels also fell, as employment declined for the second month in a row, reaching 45.9 – the lowest reading in 2010. The slowdown has also dampened future expectations compared with the past few months, although buyers remain positive.

New orders did increase, but again at a slower rate than in previous months. It follows signs that the strength of the rand against the euro is making South African exports less attractive.

The drop in confidence over the future of the sector was also highlighted in a survey by the Bureau for Economic Research (BER) last month, which said expectations among manufacturers fell from 28 to 27 points on the quarter, well below its long-term average of 47. Anything over 50 indicates an increase.

Christelle Grobler, senior economist at BER, said: “The stimulus from exports and restocking seems to have waned and domestic demand remains weak, resulting in broad-based softness.”

The recent three-week strike by the national transport provider Transnet, which affected roads, rail and ports, also affected output.

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