Producers' activity falls on holidays and strikes

Andre Coetzee says the strong link between manufacturing and mining is weighing heavily on the economy. Image: Smart Procurement

The index slid 2.9 index points to 47.4, its lowest level since July 2011.

An index level of below 50 suggests a contraction in manufacturing-sector activity.

Investec Economist Kamilla Kaplan said in a research note that part of the decrease could be attributed to "calendar effects" relating to the combination of Easter and public holidays last month that led to additional leave days taken relative to previous years.

Chartered Institute of Purchasing and Supply Africa's Managing Director Andre Coetzee said strikes in platinum mining may also have contributed. The institute is the main procurement and supply management industry body in SA.

"The strong link between manufacturing and mining obviously means that strikes in platinum mining are weighing quite heavily on the manufacturing sector," said Coetzee.

He went on to say that a contraction in manufacturing activity suggested weak manufacturing production in April and possibly moderate contribution to economic growth, given that the sector was the second-largest contributor to gross domestic product.

The new sales orders sub-index lost 3.1 index points to 43.5 - the second consecutive month that it has remained below 50.

Coetzee said this could be due to lower demand because of the ongoing strike at platinum mines. The business activity sub-index, fell 2.5 index points to 48.5 last month.

Coetzee said weak domestic demand and lack-lustre economic growth could be the reasons behind a slowdown in production since December last year.

The effects of a slightly firmer rand and a drop in the diesel price last month have helped ease some of the input-price pressures faced by producers. The price sub-index fell sharply to 79.3 index points last month from 93 in March.

Source: Business Day via I-Net Bridge