“The decline in July was expected given that the labour strike by the National Union of Metalworkers of South Africa lasted almost the full month and directly affected many manufacturing subsectors,” Abdul Davids, head of research at Kagiso Asset Management, said in a statement.
“Given that these issues, for the most part, have now been resolved and production should ramp up in coming weeks, the sector should recover during the remainder of the year.”
(READ MORE: S.Africa's June PMI edges up to 46.6)
The Business Activity index declined slightly to 39.4 in July from 39.5 in June, while the New Sales Orders index increased to 45.4 for the period from 43.9 in June. Order volumes could however recover, according to Davids, if local demand picks up post-strike.
The Business activity index in particular was the lowest in three years, and Davids added that what significantly affected the index was the National Union of Metalworkers strike, which forced a number of producers such as vehicle manufacturers, to halt production due to supply disruptions.
The Inventories index declined to 47.3 from 58.8 in June, and employment declined to 43.9 in July from 49.3 in June.
(READ MORE: Modest gain in S.Africa's employment figures)
“With activity levels remaining low, the Employment Index deteriorated to 43.9 points in July. According to Statistics South Africa’s Quarterly Labour Force Survey, 41 000 jobs were lost in the manufacturing sector during the second quarter of 2014,” Cannon Asset Management explained.
Expected business conditions declined to 55.4 for the period under review from 58.3 in June. Suppliers’ performance however improved to 59.4 in July from 52.4 in June. Prices also improved to 76.5 in July from 73.8 in June, partly due to the petrol and diesel price increases in July.