Picture: ISTOCK
Picture: ISTOCK

SA factory bosses got even more pessimistic in October, with a monthly poll failing to show an expected small rise.

The Absa manufacturing purchasing managers index (PMI) worsened to 42.4 points in October from September’s figure, which was revised up to 44.5 points from the originally reported 43.2 points.

A PMI figure below 50 points indicates a shrinking manufacturing sector.

The monthly survey sponsored by Absa and done by Stellenbosch University’s Bureau of Economic Research (BER) tends to be a good predictor of the manufacturing production and sales figures that Statistics SA provides about two months later.

“This suggests that the manufacturing sector got off to a poor start in the fourth quarter of the year. Unfortunately, purchasing managers also turned more pessimistic about business conditions going forward,” the BER said in its report on Thursday.

The index tracking expected business conditions in six months’ time slumped to 41.7 index points, the lowest level since January 2016. 

“A key reason behind the poor headline PMI is another decline in the new sales orders index. Weak demand, in turn, weighed on business activity and employment. These indices also came in well below the neutral 50-point mark.

“As mentioned in previous reports, output and job growth are unlikely to recover on a sustained basis without a pick-up in demand. While the weak domestic economy has been a drag for the manufacturing sector for several quarters, respondents now also reported a downturn in export sales.”

The report contained bad news for factory job prospects. Stats SA reported on Tuesday that formal employment in the manufacturing sector fell by 29,000 in the third quarter from the second quarter, and by 35,000 jobs over 2018.

The employment component of PMI came to 44.2 points in October.

“This instils little confidence that employment in the factory sector will recover from the drop recorded in the third quarter,” BER said.

laingr@businesslive.co.za

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