PMI sustains rally for 4th consecutive month

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PMI_July.jpgThe seasonally adjusted Absa Purchasing Managers' Index (PMI) rose to 48.6 index points in November 2017. This was the fourth consecutive increase and brought the index to its best level since May 2017. However, the PMI remained stuck below the neutral 50-point mark for a sixth straight month, suggesting that the sector still faces headwinds.

Encouragingly, the business activity index continued its recent upward trend and rose to 48 in November, which is the highest level since May 2017. The average reading so far for Q4 2017 is well above the average recorded in Q3, which is a tentative suggestion that the sector may again record positive growth in the final quarter of the year.

After a solid increase of 6.6 points in October, the new sales orders index only fell back slightly to 49.1 in November. The average reading for the first two months of Q4 is well above the average recorded in Q3 as well as Q2. This suggests that demand could be on the mend, but with the index stuck below 50, is still weak.

The employment index also dipped lower in November, after an improvement in the previous month, suggesting that the sector is unlikely to generate significant employment during Q4. The index has now failed to rise above the neutral 50-point mark for the entire 2017 and most of the second half of 2016.

On the back of an (on average) weaker rand exchange rate and higher Brent crude oil price, the purchasing price index surged to 80.7 index points in November - the highest level since June 2016.

Purchasing managers expect no change in business conditions in six months' time. The index tracking expectations stood at 50 points in November, down from 51.2 in October. However, positively, the new sales orders index came in above inventories, which means that the PMI leading indicator is above 1, which usually bodes well for output growth in coming months.

The inventories index recorded a relatively sharp drop to 43.2 points in November, down from 48.8 points in October.

After increasing for three months, the purchasing commitments index dipped lower in November. The index fell to 47 from 48.1 points in October.

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