Manufacturing sector rebounds

Figures due out on Thursday, 9 July 2009, should show that manufacturing production rebounded in May.

The manufacturing sector was left licking its wounds following the dismal contraction in production of -21.6% year-on-year in April.

During the height of global uncertainty at the start of the year, several manufacturing industries shut down temporarily, as operating rates were affected by a higher number of public holidays.

Production is likely to have been salvaged somewhat in May, as predicated by the mild recovery in the purchasing managers' index building activity sub-component to 35.1 from 32.8 in April.

While still below the key benchmark 50-level, which separates expansion from contraction, the mild recovery is pointing to a slowdown in the rate of contraction.

This trend continued in June, as the gauge for output rose further to 37.9 index points, the highest since October 2008.

Focusing on May's production number, it's expected that the low production base of May last year, in which growth of 0.5% year-on-year was reported, will provide some upside momentum in the annual rate of change this year.

A milder contraction of -14.9% year on year in May is expected, from -21.6% year-on-year in April.

Tomorrow's gross gold and foreign exchange reserves figures are expected to show an increase.

The rand traded in a range of R7.73/$ to R8.22/$, and contributed to the R1.4-billion worth of foreign exchange accumulation in May. Total foreign exchange reserves aer expected to have increased to R32.437-billion in June.

Gross gold and foreign exchange reserves are expected to have increased to R36.212-billion in June and the rand-denominated holdings of reserves are expected to have decreased from R288.041-billion in May to R284.943-billion in June.

Source: Business Times

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