Manufacturing still needs state's help

Resolving the strike by automotive industry workers has boosted manufacturing confidence. Image: Yahoo!.com

The Kagiso purchasing managers' index (PMI) showed that manufacturing activity expanded last month, supported by improvements in business activity and new sales orders. The index rose 0.7 to 50.7 last month. More importantly, it showed that local producers were more positive about the next few months.

The index that predicts business conditions in six months' time rose by 10.4 points to 62.2 - its highest level since March last year.

Kagiso asset management head of research Abdul Davids said the optimism could have been supported by increased confidence about the growth prospects of SA's key trading partners, given that local demand remains relatively soft.

Manufacturing Circle executive director Coenraad Bezuidenhout said confidence levels had improved because the crippling September strikes had been resolved.

The National Association of Automobile Manufacturers of SA said the new-vehicle sales statistics for the past month continued to reflect the effects of the prolonged automotive industry strike.

New-vehicle exports fell in September and October when they dropped by 15.1% year-on-year.

Bezuidenhout said local procurement and other industrial policy measures were gaining traction and this was boosting manufacturing confidence.

"We believe the private sector should try to localise as many of their inputs as they can do competitively," Bezuidenhout said.

Although a level higher than 50 reflects a more positive outlook for the PMI, indicating a likely expansion in manufacturing activity,. "However, most of the rise can be attributed to a resumption of vehicle production after the strikes and it remains to be seen whether or not, and to what extent, the rise in the index will be sustained," said Davids

"We have to bear in mind that the increase in the PMI was not necessarily driven by meaningful recovery in demand for manufactured goods," ETM Analytics analyst Manisha Morar said.

Source: Business Day via I-Net Bridge