Strike action accelerates PMI plunge - hits two-year low

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Strike action.jpgThe Kagiso Purchasing Managers’ Index (PMI) declined for the fourth consecutive month in July, hitting a two-year low.

The PMI fell by 9.7 points to 44.2 points last month, which is significantly below the global PMI level.

While the magnitude of the decline of the seasonally adjusted PMI is surprising, it can be explained to a degree by prolonged strike activity in the manufacturing sector during July, the Kagiso website reports.

The impact of the strikes was most visible in the business activity index, which plunged by 19.3 index points in July to 35.9 and was by far the PMI sub-index that experienced the biggest decline.

The July PMI decline is the second largest between any two months going back to late 1999 when the PMI was first published.

Perhaps the only piece of upbeat news was on the input cost front – after declining for three consecutive months, the PMI price index experienced a further (albeit marginal) easing to 75 during July.

The PMI’s softening trend is in line with international developments, says Kagiso. Flash estimates released last week showed that the Chinese PMI declined to a 28-month low of 48.9 in July, while the Euro-zone PMI moderated to a 22-month trough of 50.4.

One has to go back to July 2009, i.e. in the midst of the 2008/9 recession, to find the index at a weaker level.

A number of the other important sub-indices also eased significantly in July with new sales orders (-9.2 points) and inventories (-10) the hardest hit. Job prospects in the factory sector remain dire with the employment index declining by 8.6 index points to below 40 at 39.1.

Read the report here

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