Small gain in SA manufacturing PMI

The seasonally adjusted Kagiso Purchasing Managers Index (PMI) increased by 2.4 index points in November, Kagiso Tiso Holdings said on Monday.

The recent increase, while bringing the PMI up to a level of 49.5, had not carried it into positive territory, it said.

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The PMI measures business conditions in the manufacturing sector. Below 50 indicates contraction in the manufacturing sector and above 50 shows expansion.

The Chartered Institute for Purchasing and Supply Africa and the Bureau for Economic Research at the University of Stellenbosch conduct the survey every month.

Kagiso Asset Management head of research Abdul Davids said the weak PMI was in-line with the trends of key trading partners.

“PMI readings in the Eurozone, the leading foreign market for our locally-produced goods, remains in contraction. China, however, is showing some improvement,” he said.

“In addition, the declining trend in the average PMI suggests that the manufacturing sector's contribution to fourth quarter GDP 1/8gross domestic product 3/8 could be lower than the third quarter.”

The PMI reached its lowest level since July 2011 in October. The index had previously declined for three consecutive months.

The business activity index gained 2.7 points to reach a 45.9 index.

Davids said that although this was an improvement, the index still suggested that output was under pressure.

“Similarly, while new sales orders rose by 2.4 points, its level of 47.7 points to persistently weak demand,” he said.

The price index recorded its fourth consecutive increase to 79.5 Ä the highest level since January 2012.

“The rise in costs over the last few months is largely due to the weaker rand, which averaged R8.78 to the US dollar in November compared to R8.65... in October,” Davids said.

Following gains in September and October, the expected business conditions index declined by nearly five points.

The employment index broke through the 50-point mark to reach 52, its highest level this year.

However, Davids said recent research showed that executives in the manufacturing factory sector were pessimistic about employment trends and expected a further deterioration in the job market during the first quarter of 2013. -Sapa