Q3 PMI up by 0.6 compared with Q2

The seasonally adjusted Barclays Purchasing Managers’ Index (PMI) remained virtually unchanged at 49 index points in September 2015, marginally up from 48.9 in August. The average for the third quarter is 49.8 index points, slightly better than the 49.2 recorded in the second quarter, but still below the neutral 50-point mark.

While the headline index remained unchanged, the major subcomponents moved in different directions. On a positive note, the new sales orders index rose for a second straight month to 51.9 index points and the employment index increased to 49.5. While respondents indicated that domestic demand remained under pressure, the sustained weak rand exchange rate and continued recovery in the Eurozone might have provided some support for exporters. However, the weak rand – pushing up the cost of imports – was also the likely driver of the 1.3-point uptick in the price index. The increase was despite a hefty fuel price decline that came into effect at the start of the month.

The improvement in new sales orders did not filter through to increased output levels. The business activity index fell further to 46.6 index points, from 48.6 in august. Also weighing on the headline PMI was the 3.7-point decline in the suppliers’ performance index. This index fell to the lowest level since august 2009.

The inventories index dropped to 50.3 index points. Given the slightly higher reading on the new sales order index, the PMI leading indicator edged above 1 for the first time this year. This suggests that production could pick up somewhat going forward. However, purchasing managers were more pessimistic about business conditions in six months’ time. The index measuring expected business conditions fell to 49.3 in September, following a 10.7 index point drop to 52.5 in August. Barring a single-month dip to 47 index points in March 2013, this index is now at the lowest level since early 2009. The factory sector is likely to face continued headwinds from weak domestic consumer demand. Manufacturers might also be increasingly concerned about possible adverse spillovers from the slowdown in China and its impact on commodity prices and producers (including the South African mining sector).