Sharp fall in PMI possibly reflects bleak sentiments around land debate

| 0 Comments

PMIdown_100.jpgThe seasonally-adjusted Absa Purchasing Managers' Index (PMI) declined to 43.4 points in August from 51.5 points recorded in July. August's level is the lowest recorded in more than a year.

Overall, the average level of the PMI recorded during the first two months of Q3 of 2018 was 47.5, which is below the neutral 50-point mark and two points below the average recorded in Q2 of 2018.

The deterioration was driven by sharp declines in the New Sales Orders Index as well as the Business Activity Index. However, inventories and supplier deliveries came in above the neutral 50-point mark in August, which provided some support to the headline PMI, noted the Bureau for Economic Research (BER).

After reaching a five-month high in July, a sharp decline in the Business Activity Index (from 50.3 to 37.2) in August does not bode well for manufacturing output in Q3. This is after official production figures showed a modest quarter-on-quarter decline in Q2.

The New Sales Orders Index plunged deep into negative terrain in August. The index fell from a solid 52.8 points in July to 39.9 in August. Given that respondents were slightly more positive about export sales compared with the previous month, the deterioration seems to be driven by a sharp downturn in domestic demand.

The deterioration in demand contributed to a fall in output, as reflected in the big decline in the Business Activity Index, which, in turn, weighed on the Employment Index, which fell to its lowest level in six months, coming in at 45.5 points.

The significant declines in August are surprising as it is hard to imagine that the underlying economic conditions deteriorated as rapidly as reflected by the main PMI sub-components, noted the BER, stating that "strictly speaking, the PMI is not a sentiment indicator as it gauges activity levels, but the responses of Purchasing Managers may have been influenced by the further ratcheting up of the land debate during the past month. The PMI has also been fairly volatile in recent times".

Therefore, at least another couple of readings are required before any strong conclusions can be drawn from this data, including whether the PMI's move above 50 points in July was merely a temporary blip.

Worryingly, Purchasing Managers have turned even more downbeat about expected conditions going forward.

The index tracking expected business conditions in six months' time declined for a sixth consecutive month, reaching 44.6 in August. This is the lowest level since early 2016.

The fact that a further deterioration is expected from the bleak picture of current conditions, as reflected by the August PMI survey, is very concerning. The PMI's leading indicator also moved back below one, with inventories (rising by 2.2 points in August to 50.7) outstripping sales orders, which usually does not bode well for manufacturing output going forward.

The Purchasing Commitments Index declined for a second consecutive month. The index is now about 15 points below a recent peak reached in February 2018. The current level is the lowest in a year.

The Purchasing Price Index declined after two months of sharp increases. The index declined to 79.7 in August, which is still the second-highest reading in 2018 (after the 83.6 recorded in July). The moderation in the index was despite a weaker (on average) Rand exchange rate compared with the previous month. However, the Brent crude oil price traded lower. Fuel prices increased marginally at the beginning of September, putting further upward pressure on input costs. The slight easing of the index in August does not point to lower costs for manufacturers, but merely a slowdown in the rate of increase.

Leave a comment


 

 

Career opportunites

Tutor and Coordinator

  • Gauteng Operations, Planning & Inventory Permanent Procurement Management Supplier / Business Development
Purpose of the job: To plan, coach, advise

Commodity Manager

  • <500 000 Commodities Gauteng Procurement Management
Are you a Commodity Manager looking for the

Supply Chain Professional

  • <500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Supply Planning

  • <500 000 Gauteng Operations, Planning & Inventory Supply Chain
Seeking dynamic candidates to take to the market

Industrial Engineer

  • <500 000 Gauteng Industrial Engineer Procurement Consultant
Are you an Industrial Engineer looking to make

Logistics Manager

  • >500 000 Gauteng Logistics & Warehousing Supply Chain
Seeking vibrant industry specific individuals seeking new opportunities

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Procurement Management
Looking for an Operations Manager to take into

Supply Chain Systems Administrator

  • >500 000 Gauteng Procurement Management Strategic Sourcing Supply Chain
One of South Africa's leading, mining companies is

Logistics Manager

  • <500 000 Gauteng Logistics & Warehousing Procurement Management
Are you an experienced Logistics Manager looking for

Continuous Improvement Manager

  • >500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Warehouse Assistant

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory
I am currently looking for ambitious Demand Planner,

Internal Procurement Officer

  • <500 000 Gauteng Permanent Procurement Officer / Specialist Strategic Sourcing
Position Available: Internal Procurement Officer Status : New ...More

Supply Chain Officer

  • <500 000 Gauteng Procurement Officer / Specialist Supply Chain
Seeking dynamic candidates to take to the market

Supply Chain Planner

  • <500 000 Free State Operations, Planning & Inventory Supply Chain
Seeking dynamic candidates to take to the market

Senior Buyer

  • >500 000 Buyer Gauteng Procurement Management
Tech-Pro specialises in placing professionals in the Supply

Industrial Engineer

  • <500 000 Gauteng Industrial Engineer
Tech-Pro specialises in placing professionals in the Supply

Warehouse Manager

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Supply Chain
Seeking hands on individuals that come from an

Manufacturing Purchasing Specialist

  • >500 000 Procurement Officer / Specialist Supply Chain Western Cape
A leading auto manufacture company based in Cape

Procurement Sourcing Specialist

  • <500 000 Gauteng Procurement Consultant Strategic Sourcing
A Leader in the Supply Chain industry is

Planning Manager

  • >500 000 Gauteng Operations, Planning & Inventory Procurement Management
Looking for Planning Managers to take into the