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HSBC confirms drop in local manufacturing activity

Another monthly survey has confirmed the deterioration of business conditions in the local manufacturing sector because of a sharp drop in new business.
HSBC has confirmed that the outlook for manufacturing declined sharply in April. Image: David Castillo Dominici
HSBC has confirmed that the outlook for manufacturing declined sharply in April. Image: David Castillo Dominici Free Digital Photos

The HSBC purchasing managers index (PMI) showed manufacturing output in South Africa dropped from March's 50.2 points to 49.4 in April‚ its lowest level since June last year.

This as private sector companies cited a decline in new business and disruptions caused by ongoing mining strikes.

The manufacturing sector is the second-largest contributor to gross domestic product‚ after mining.

The HSBC PMI index‚ produced by global research group Markit‚ followed the release of a disappointing Kagiso PMI survey‚ which scored manufacturing activity at 47.4 points last month‚ its lowest level since July 2011.

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

Like the Kagiso PMI‚ the HSBC survey showed new orders declined significantly in April‚ recording the quickest pace of contraction in nearly three years as strikes in the local mining sector constrained demand.

"The deterioration in business conditions facing private sector companies was broad-based‚ with output‚ new orders‚ and inventories contracting‚ delivery times lengthening‚ and the pace of job creation slowing‚ albeit still positive‚" HSBC Economist David Faulkner said.

He said that the protracted strike in the platinum sector remained a key factor behind weak activity levels‚ with no signs of an immediate resolution to the protest that has kept platinum production at Anglo Platinum‚ Impala Platinum and Lonmin's Rustenburg operations to a standstill since 23 January.

Panelists mentioned that‚ in addition to the mining strikes‚ the local elections weighed on demand.

Source: I-Net Bridge

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