Activity in the manufacturing sector, while little changed last month, remained in expansion territory, a survey showed on Monday. This suggests a positive start to production in the third quarter and may support growth over the period.
The seasonally adjusted Barclays purchasing managers index (PMI) remained unchanged at 51.4 index points last month. Despite the lack of improvement, the fact that the index remained above 50 suggested that activity was in expansion territory. A reading below 50 suggests contracting manufacturing activity.
"While the July print is itself not great, we think it is still a welcome positive signal, particularly given that the manufacturing sector continued to contend with a challenging environment of severe electricity shortages during the month," Barclays economists Miyelani Maluleke and Peter Worthington said.
Business activity improved to its best level since January at 53.2, while inventories recorded their biggest gain, rising by 3.4 index points to 60.2.
The subindex representing new sales orders fell by 1.9 index points to 49.8, providing "further evidence of the general demand weakness in the domestic economy". Employment in the sector also took strain with the employment subindex falling two index points to 46.9.
In what Barclays economists referred to as somewhat surprising, purchasing managers remained optimistic about the future. The subindex for expected business conditions in six months' time rose 1.2 index points to 63.2. "It could be that the sustained weakening trend of the rand exchange rate and improved news flow on the Greek debt crisis buoyed sentiment."
The price subindex declined by 2.1 points to 75, reflecting the effect of lower commodity prices, particularly of oil.
Source: BDpro
