Slow growth makes SA buyers uncertain about economy

7 July 2011

7 July 2011 | Angeline Albert

Purchasers in South Africa are less optimistic about the economy than a month ago, according to the latest Purchasing Managers’ Index (PMI).

The Kagiso PMI showed growth in the manufacturing sector slowed for a third consecutive month to 53.9 in June, compared with May’s figure of 55.1. This was the lowest level recorded so far in 2011, although it remained above the 50 mark indicating expansion.

Momentum was lost in the number of new sales orders, from 61 last month to 58 in June, and business activity which slowed from 56.8 to 55.2.

As a result buyers were less optimistic about future business conditions. After reaching 66.7 points in May, the expected business conditions index eased to 64.

Manufacturers also remained reluctant to increase the size of their workforce. Employment fell more quickly than in May, contracting to 47.7 compared with 48.7 the month previously.

“The most concerning part of the SA manufacturing story remains the employment situation,” said the report. “Given that the recent loss of global momentum (driven by the impact of the previous strong rise in commodity prices such as oil and the Japanese disaster in March) will in all likelihood prove to be transitory, the declines for the SA PMI should also stabilise in the not too distant future. However, because of the lag between SA and global trends, the domestic PMI could see another month or two of declines before a re-acceleration takes hold.”

There was slight relief for purchasers, as the rate of increase in input prices slowed to from 80 in May to reach 76 in June.

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