South Africa’s purchasing managers index (PMI) dipped to 46,2 in October from an upwardly revised 47,7 in September, on lower new sales orders and output volumes, sponsor Investec said on Monday.
The latest index for the PMI, a measure of the country’s underlying manufacturing activity, reflected the challenging economic environment facing producers partly due to slowing domestic demand, Investec said in a statement.
”The decline in the Investec PMI reflects the challenging economic environment facing producers during the month, as the domestic cyclical downturn in economic activity was compounded by the global economic crisis,” said Mokgatla Madisha, portfolio manager at Investec Asset Management.
”Not only is domestic demand slowing, but there is increasing evidence of further moderation in growth by our most important trading partners.”
South Africa’s central bank has raised interest rates by 500 basis points since June 2006, which along with higher inflation, has weighed on domestic demand.
New sales orders fell to 42,8 points in October from a revised 46,5 while output volumes deteriorated with the seasonally adjusted business activity index falling to 42,5 points from 43,7 in September.
Inventory levels decreased to 49,1 points from 56, suggesting purchasing managers were concerned and uncertain about the impact of a global economic slowdown on the domestic economy.
A credit crisis with its roots in the United States housing market has spread across the world and has raised the risk of a recession in the global economy.
Investec said its price index rebounded to 85,7 in October, after retreating sharply to 81,5 in September, as a weaker rand lifted the costs of imported goods.
The currency plunged to a six-and-a-half year low of 11,88 to the dollar in mid-October. It was last at 9,72.
”Even though dollar-based commodity prices declined further in October, the rand collapse resulted in renewed pressure on the costs on imported inputs,” Madisha said.
Madisha added the PMI could fall further over the next six months as the bleak outlook of the world economy pushed the recovery in the index further down the line.
”While the August to October PMI readings reveal a measure of resilience, purchasing managers have adjusted their expectations regarding business conditions in six months’ time downwards, with the expectations [of the] index plunging from 57,8 to 45,9.” – Reuters