The seasonally adjusted Kagiso Purchasing Managers Index (PMI) for September showed a huge increase.
Released on Thursday, the PMI — — an indication of how the country’s manufacturing sector is performing — posted a massive gain of 8,7 index points from 39,3 in August to 48,0 during September.
This was the second largest increase recorded since the survey commenced in September 1999.
“September’s results are showing signs of life in the domestic manufacturing sector for the first time since the collapse of United States investment bank Lehman Brothers in September 2008”, Andre Coetzee, head of fixed income at Kagiso Securities said.
“Although we would like to see confirmation in the 2009 fourth quarter PMI data, the latest results seem to confirm the analysis presented in the July PMI report, namely that South Africa’s manufacturing recovery will probably be similar to countries such as the US and UK who, after an initial muted rise in their respective PMIs, experienced accelerated gains during the following months,” he added.
Both the seasonally adjusted business activity and new sales orders indices showed that output volumes did not contract during September.
Both indices rose sharply to 49,4 and 50,7 respectively.
All near-term demand indicators showed similar increases. Most notably, the seasonally adjusted inventories index climbed to 47,6 points, which was a second consecutive large increase.
Both the backlog of sales orders and purchasing commitments indices increased from 27,3 to 34,4 and 36,6 to 44,3 points respectively.
“Demand may be returning to the system”, Coetzee noted.
Input cost pressures remained moderate during September — the price index remained below 50 at 48,1 points.
Even employment — which is a lagging indicator — responded positively during September, increasing from 37,5 to 42,7 index points. The level of the index, however, continued to indicate factory job cuts.
With the exception of February 2009, purchasing managers’ optimism regarding medium-term business conditions has been rising steadily since November 2008.
“September’s results saw this index increasing to 70,3 points — the highest since early 2007”, Coetzee said. — Sapa