South Africa’s manufacturing sector appears to be on track to join the global manufacturing rebound, the latest Kagiso Purchasing Managers Index (PMI) released on Tuesday showed.
The seasonally adjusted Kagiso PMI increased from 37,3 index points during July to 39,3 in August.
”Underlying indicators of output volumes, along with the slight increase in the headline figure indicates that South Africa’s manufacturing sector is — albeit with a lag — on track to join the global manufacturing rebound,” said Andre Coetzee, head of fixed income at Kagiso Securities.
The global PMI had increased from 33,7 points in December 2008 to the neutral 50 level during July 2009.
”Output volume indicators showed some long awaited signs of life: the seasonally adjusted business activity and new sales orders indices increased from 33,8 to 38,3 and 35,8 to 39,5 respectively during August,” Coetzee said.
These were the highest figures posted since October 2008.
”Near-term demand indicators have not, however, followed the same positive upturn seen in output volumes,” Coetzee noted.
Even though the seasonally adjusted inventories index increased (posting 37,0 points during August), the backlog of sales orders weakened to 27,3 index points in August.
The lack of response of purchasing commitments (36,6 in August and 36,7 in July) also indicated that a full-blown demand recovery had not yet taken hold.
Coetzee said input cost pressures continued to ease during August, seeing the price index decline from 48,7 to 45,3, closely mirroring the producer price deflation of recent months.
Contributing to a still low headline Kagiso PMI figure, the seasonally adjusted employment index weakened from 40,8 to 37,5 during August, Coetzee noted.
”As indicated in previous reports, the response of employment tends to lag developments in final demand,” he said.
A strong majority of purchasing managers now expected business conditions to improve in six month’s time (59,3 index points in August).
”Purchasing managers haven’t been this optimistic since December 2007 (59,5 index points), the time of what we now know was the start of the United States recession,” Coetzee said. — Sapa