Dark days indeed

There has been no respite from the downturn. Domestic sales have been knocked by a fall-off in consumer spending, earnings from exports have been dampened by the strong rand, and the recession in foreign markets has forced companies to make painful cuts. “We have been through a retrenchment process,” says Michael Goldberg, executive chairman at appliance maker and distributor Nu-World.

The sharp drop in global steel prices late last year compounded the sector's problems, with some manufacturers like BSi Steel writing down R51,4m in inventory.

The latest numbers bear out the malaise in the sector. In June, manufacturing volumes dropped for the ninth successive month and the Kagiso purchasing managers index, which measures business activity at the manufacturing level, declined from 37.9 in June to 37.3 index points in July (see graph).

But there are signs of improvement. Purchasing managers expect a better time in the second half of the year, says Kagiso Securities' André Coetzee, with the expected business index rising to 55.1 in July — its fifth successive increase.

Goldberg agrees and says consumers are starting to become a little more confident thanks to the interest rate cuts. “Now it's looking better than it did at the beginning of the year. The worst seems to be over.”

Source: Financial Mail

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