02 Aug.
Absa: SA Morning Sheet.
This is a daily economic comment …
The sheets can be downloaded daily from Absa Economic Research
An extract fro today’s sheet is provided as an example:
July’s 9.2 index point fall in South Africa’s PMI to 44.2 from 53.9 caused somewhat of a stir in markets, and placed further concerns on the sustainability of the domestic manufacturing sector (and indeed the domestic economy’s) recovery. Underpinning the deterioration in the headline index was a massive 19.3 index point fall in the current business activity sub-index, which sits at a lacklustre level of 35.9.
In our view, a lot of the fall in this sub-component can be explained through the significant amount of strike action in the manufacturing (and related) sectors which took place in July. Though some sectors have managed to come back online again in recent days, the fact that some other sectors in the economy (mining for instance) have also now jumped on the bandwagon, remains concerning.
Disappointingly, even the more-forward looking sub-components within the PMI also showed significant deteriorations in July with new sales orders and inventories both falling back below 50 to 48.8. Reflecting further pain for the sector’s employment prospects, the PMI employment sub-index fell to a 27 month low of 39.1 (prior: 47.7).
The deterioration in the July PMI is disappointing and seems to suggest that, in much the same manner as last year, South Africa’s manufacturing sector is likely to be a casualty of the significant amount of industrial action in the economy. A host of weaker global PMIs in recent days – EEMEA (excluding South Africa) has already declined 0.6pts to 52.1 in July while Europe and China (our largest trading partners) fell to just above and just below 50, respectively – also should not be ignored. And this, following on from last week’s much poorer-than-expected US GDP figures (our US team have subsequently downgraded their US GDP forecasts by as much as 1pp over the next two years and have pushed out interest rate hikes in the economy to 2013), suggests some loss in global growth momentum is being experienced.
In our view, this is also likely to impact on sentiment in the manufacturing sector in the coming months and therefore we expect some of this weakness to persist in the near term. …
The sheets can be downloaded daily from Absa Economic Research
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