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South Africa PMI Drops Below 50 as Manufacturing Shrinks

South Africa’s purchasing managers’ index fell below 50 for the first time in six months in June, indicating a contraction in manufacturing and undermining the outlook in Africa’s largest economy, Kagiso Tiso Holdings said.

The seasonally adjusted index fell to a 10-month low of 48.2 from 53.6 in May, Johannesburg-based Kagiso said in an e-mailed statement today.

“In addition to weaker external demand, the latest figures indicate a sustained and worsening slowdown in domestic demand,” Abdul Davids, head of research at Kagiso Asset Management, said in the statement.

Factory output, which makes up 15 percent of the economy, has come under pressures as the debt crisis in Europe cuts demand from a region that buys about a third of South Africa’s manufactured goods. Production rose 1.2 percent in April after contracting 2.9 percent in the previous month, the statistics office said on June 7.

The new sales orders index, which has the largest weighting in the PMI, fell 5.2 points to 46.5 in June, while the business activity sub-index declined more than any other, slipping 9 points to 47, Kagiso said. The employment sub-index dropped to 46.8 from 53, indicating manufacturers fired workers last month.

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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