Manufacturing sector rises slightly in September but is still contracting

South African factory managers were slightly less pessimistic in September than in August, with the monthly Absa sponsored purchasing managers index (PMI) rising to 44.9 points from 44.

A score of under 50 indicates SA’s manufacturing sector is contracting rather than expanding. The index tends to be a reliable forecaster of what Statistics SA’s manufacturing data will show in about two months.

Of the main subcomponents, the new sales orders index registered the biggest increase in September, rising 3.1 points to 43.2, Absa said in Monday’s statement.

"While domestic demand conditions likely remained tough, some respondents noted an improvement in exports after a dip in August. Owing to the uptick in demand, the business activity index also rose in September. The index increased for a second month, up to 42.8 index points from 41.3 in August. Despite the rise in the output index, the employment index fell back to July’s level of 44.1 index points," the report said.

"On a positive note, respondents were more optimistic about future business conditions. The index tracking expected business conditions in six months’ time rose back above the neutral 50-point mark to 52.4 index points. This is the best level since May 2017."