July 1 (Bloomberg) -- South Africa’s purchasing managers’ index fell in June to its lowest level this year, Kagiso Securities Ltd. said, indicating the recovery in manufacturing is losing momentum.
The seasonally adjusted index slid to 53.9 from 55.1 in May, Johannesburg-based Kagiso said in an e-mailed statement today. The June level is the lowest since December. The PMI has been above 50, which indicates an expansion in factory production, since November.
The central bank cut its benchmark rate three times last year, pushing it to a 30-year low of 5.5 percent to help support consumer spending and boost growth in Africa’s biggest economy. Manufacturers are still holding back on investment as demand remains subdued, undermining job creation.
“Although the level of the index suggests that the manufacturing sector is expanding, it also signals a moderation in the sector’s growth momentum,” Abdul Davids, head of research at Kagiso, said in the statement.
The index measuring new sales orders fell to 58 in June from 61 in the previous month, while the business activity sub- index slid 1.6 points to 55.2, Kagiso said. Managers were also less optimistic about future business conditions, with the index measuring the business outlook declining 2.4 points to 64.3.
Manufacturers probably shed jobs at a faster pace in June, with the employment sub-index dropping to 47.7 from 48.7 in May, the survey showed.
“Given that the recent loss of global momentum was driven by the impact of the previous strong rise in commodity prices such as oil and the Japanese disaster in March, this current global slowdown will in all likelihood prove to be transitory,” Davids said. “However, because of the lag between South Africa and global trends, the domestic PMI could see another month or two of declines before a re-acceleration takes hold.”
The Bureau for Economic Research, based at the University of Stellenbosch near Cape Town, and the Institute of Purchasing and Supply South Africa conduct the PMI survey on behalf of Kagiso.
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