14 September 2010 | Nick Martindale
Buyers in South Africa’s manufacturing sector have a crucial role to play in ensuring companies remain competitive while the economic outlook improves, the South African Purchasing Managers’ Index (PMI) suggests.
The PMI, which uses a number of factors to produce an overall score, revealed that economic activity in the sector picked up in August after two months of negative growth.
The seasonally adjusted survey of buyers, where anything over 50 represents growth, hit 50.3 in August compared to 49.5 in July.
But increases in raw material costs saw prices increase to 60.6 from 59.4, while purchasing managers continued to scale back on inventory as they waited to see the strength of the global economic recovery and the impact of the potentially damaging strike by public sector workers.
André Coetzee, managing director of CIPS Southern Africa, said: “While the global economic recovery remains fragile and patchy, companies and organisations will have to rely more on extracting value for stakeholders by improving internal efficiencies through strong post-contract management practices.
“This places procurement fairly and squarely on the centre stage.” Seasonally adjusted business activity fell during the month of August to 46.9 from 50.9 in July; well down on the figure of 65.2 recorded in February.
“A lot of people engaged in World Cup activity in the manufacturing sector so hours worked really dropped down and we’re seeing the tail end of that,” said Coetzee.
New sales orders went above 50, rising to 52 from 48.5, while purchasing commitments increased from 48.3 to 49.5. Supplier performance also improved, from 49.2 in July to 54.6 in August, the PMI showed.
August’s results contrast with July’s PMI results where mixed signals were evident. While the overall index for July remained in decline there were signs for optimism in the research, as business activity climbed 5.7 points to 50.9.
Hugo Pienaar, senior economist at South Africa’s Bureau for Economic Research, told SM: “While the economy came out of recession in the second quarter of 2009 and the initial part of the recovery was arguably faster than expected, the underlying conditions remain challenging.”
Pienaar went on to say that SA purchasing managers expect conditions to improve in six months’ time but added that concerns about the possibility of a global growth relapse had not disappeared.