JOHANNESBURG (Reuters) - South Africa’s purchasing managers index fell to a record low in February, pointing to further deterioration as a global economic slowdown pushes Africa’s biggest economy towards recession.
Official data showed more jobs were created in the fourth quarter of 2008, although Statistics South Africa warned on Monday the gains were unlikely to be repeated in the first quarter of this year.
Sponsor Investec said the PMI, which measures underlying manufacturing activity, fell to a new record low of 39.2 points on a seasonally adjusted basis from 40.7 in January — way below the 50 breakeven mark between contraction and expansion.
“After seeing some improvement in December 2008 and in January this year, business activity slowed further and continues to face extreme pressure,” said Mokgatla Madisha, portfolio manager at Investec Asset Management.
Manufacturing, the second biggest contributor to South Africa’s gross domestic product, has come under severe strain from a global downturn, while higher interest rates have suppressed domestic demand.
The sector contracted by a near 50-year record 21.8 percent in the final three months of last year, and exports for January collapsed 25 percent compared to December, putting the economy on the road to its first recession in 17 years.
South Africa’s central bank has cut it its main borrowing rate by 150 basis points since December in response to an improved inflation outlook and sluggish growth. It had earlier raised its repo rate to 11.5 percent to counter rising prices.
Investec said expected business conditions and new sales orders declined to 38.3 and 31.9 points respectively, indicating uncertain prospects for the sector, while employment also fell to 40.8 points, from 43.0 in January.
“The precipitous decline in final demand across economies and the sharp slowdown in trade activity continues to provide headwinds to the local manufacturing sector,” Madisha said.
“Forward looking indicators remain in negative territory, indicating a weak outlook for the sector.”
The statistics agency said the official jobless rate fell to 21.9 percent in the fourth quarter of 2008, from 23.2 percent, with the number of unemployed people at 3.873 million.
But the low employment index in the PMI suggested job losses were likely in manufacturing in the first half of 2009 and Statistics South Africa said a lag in response to weaker economic conditions may see a reversal going forward.
Analysts said the rise in employment was an anomaly due to seasonal factors.
“It’s quite feasible, one tends to see a seasonal rise in economic activity over the December period, and once one adjusts for seasonality the real economic data would actually be judged to be unfavourable,” Standard Bank chief economist Goolam Ballim said.
The total amount of people with jobs rose a net 189,000 to 13.844 million, yet 97,000 people gave up looking for work during the quarter, putting the broader definition of unemployment, including discouraged jobseekers, at 29.3 percent.
The Chamber of Mines, which represents mining companies, has forecast the industry will cut 24,000 jobs this year, although analysts expect the figure to rise.
Lonmin, the world’s third biggest platinum producer, has announced it will shed 5,500 workers at their South African operations, while top producer Anglo Platinum plans to cut 10,000, mostly contract, workers.
The Stats S.A. data showed the manufacturing sector added 27,000 jobs. Miners employed 7,000 more people.