PMI rebounds but remains below the key 50 level

01 September 2014
The seasonally adjusted Kagiso PURCHASING MANAGERS’ INDEX™ (PMI™) rose by 3.1 index points to 49.0 in August 2014. Abdul Davids, the Head of Research at Kagiso Asset Management, commented that “the improvement in the August PMI signalled a return to more normal manufacturing output levels following months of production disruptions due to industrial action in the platinum mining and metal sectors.” He further stated that the improvement was particularly visible in the sharp increases in the business activity and new sales orders indices. Nonetheless, the headline PMI remained below the neutral 50-point mark for a fifth consecutive month, suggesting that conditions in the factory sector are still relatively subdued.
The new sales orders index rose from 45.4 in July to 49.8 index points in August – the highest level since February and the business activity index shot up by 8 index points to 47.4 in August. “While demand in the broader economy remains weak, the slow return to normal production levels in the platinum mining and metal sectors likely supported the improvement in new sales order and business activity levels” Davids points out. The price index rose for a third consecutive month to reach 77.3 in August and according to Davids this was likely driven by a sharp rise in the petrol and diesel price during the month.

Davids commented that the PMI™ in South Africa continue to diverge from international PMI figures, with the US flash PMI rising to 58 index points whilst both the Eurozone and Chinese PMI flash readings remained above the key 50-level in August.

Producers are slightly more optimistic about the future as the index measuring expected business conditions in six months’ time nudged up to 56.3 index points from 55.4 in July.