PMI points to improving conditions in manufacturing sector

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Manufacturing_PMI.jpgThe seasonally adjusted Kagiso Purchasing Managers’ Index™ (PMI™) increased by 1.7 index points to reach 52.4 in November.


This brings the average for the first two months of 4Q2013 to 51.6, said Abdul Davids, Head of Research at Kagiso Asset Management.


PMI™ subcomponents indicate that manufacturing production in the final quarter of 2013 should recover from the sharp decline recorded in the third quarter when overall production was dragged down due to prolonged strikes in the automotive sector, said Davids.


Encouragingly, the Price Index declined for the fourth consecutive month from 80.8 to 77.8 and is now at its lowest level this year.


The Inventories Index rose marginally from 52.8 to 53.2. The higher level suggests that manufacturers may be expecting demand conditions to improve going forward, said Davids. “This is supported by the Purchasing Commitments Index, which rose to 55.7, its highest level since May 2011,” he says.


Furthermore, after remaining unchanged in October, the Employment Index gained 1.4 points to reach 50.8, its highest level this year. However, since the index is only just above the key 50-point mark, it does not suggest a significant improvement in manufacturing employment.


Meanwhile, the improvement in the PMI™ was broad based, with all of the main PMI™ subcomponents increasing compared with the previous month. Most notably, the Business Activity Index rose from 52.6 to 54.0 index points in November. The New Sales Orders Index also increased and is now at a level of 51.6.


Although the index measuring expected business conditions in six months’ time declined, Davids said that the outlook for the sector remains positive. “Despite the decline, at 59.8 points, the index is at a high level and suggests that manufacturers are optimistic that conditions will improve,” he concluded.


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