Power outages and lower commodity prices are key factors in South Africa’s manufacturing sector struggling to gain momentum, a key index recently showed.

RTT News reported that the Kagiso Purchasing Managers’ Index (PMI) – which gauges activity in manufacturing – rose slightly to 47.9 last month from 47.6 in February. A reading below 50 suggests activity is contracting. The PMI average for the first quarter of this year was 49.9 points, just below the 50-point mark and 1.3 points lower than last year’s fourth-quarter average.

“This suggested that the rebound in actual manufacturing production growth recorded in the fourth quarter of last year was unlikely to be repeated in the first quarter of this year,” Kagiso Asset Management head of research Abdul Davids said.

“Electricity load shedding and general weak demand seem to have nipped the recovery in the bud and will continue to weigh on the manufacturing sector.”

William Jackson, senior emerging markets economist at Capital Economics, said, “Manufacturing output might have fallen by about 3% – 4% year on year in the first quarter of this year if the PMI was anything to go by. Problems with competitiveness, an unreliable power supply and the risk of strikes would probably keep manufacturing growth subdued.”

Business Day reported that new sales orders and business activity sub-indices, the two largest subcomponents of the PMI, fell last month. New sales orders were down to 49 points from 49.3, and this slower demand for sales orders, in turn, contributed to the business activity subindex falling to 44.6 index points last month from 45.5.


 

By Kristy Jooste

Sources: Business DayRTT News