Overall, production growth is expected to remain positive going into the third quarter, yet possibly at lower rates than those recorded in the second quarter.
Nevertheless, an analyst says she cannot ignore the loss in momentum in the manufacturing sector - SA's second largest - which may reduce the positive effect it has had on GDP growth in previous quarters.
Data on Monday, 2 August 2010, showed that the Kagiso/BER PMI improved in July from 47.5 index points in June to 48.6 index points.
Although a marginal improvement, the rise breaks a four-month downward trend in the index, providing some encouragement for continued activity in the manufacturing sector.
Some moderation in the index had been anticipated in line with more sustainable levels of production activity given the slowing momentum in the global economy.
Nevertheless, analysts continue to suspect that the index fell below the 50-point benchmark in June and July as a result of the World Cup being a disruption to usual business activity in the productive sectors.
This suggests that the index is likely to have been distorted by reduced productivity in these two months, especially in June given that the bulk of the tournament was played during this month.
Leading the improvement in the index in July was the business activity component at 50.9 index points in July, from 45.2 index points in June, while the rise in the backlog in sales component, from 38.5 index points in June to 40.1 index points in July, suggests that weaker activity in June was made up in July and months to follow.
However, the July PMI provides a mixed basket in terms of the manufacturing sectors outlook in the next few months.
Despite the improvement in business activity, the economic analyst spoken to said she was disappointed by the continued decline in new sales orders component from 50.4 index points in June to 48.5 index points in July and the purchasing commitments component from 50.0 index points to 48.3 index points.
Having fallen below the 50 point benchmark, both components marked their third consecutive month of decline in June, indicating that production activity is likely to slow even further in coming months.
On the other hand, the expected business component, albeit declining for the fifth consecutive month from a peak of 74 index points in February, remained well above the 50 point benchmark at 57.7 index points, which spells continued expansion in the sector in six months time.
Surprisingly, the employment component increased in July from 45.9 index points in June to 47.6 index points in July, reflecting some reduction in uncertainty in the manufacturing sector, despite the decline in sales orders.
The price component also made a considerable decline from 64.1 index points in June to 59.4 index points in July, the third month of decline in manufacturing input prices, which should be encouraging for producers in the medium term.
For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.
We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.
Go to: http://www.inet.co.za
