The seasonally adjusted Investec Purchasing Managers Index (PMI) declined slightly by 0.3 points to 54.8 in December. "The decline was driven by slight moderations in both output and new sales orders growth," said Andr Roux, head of fixed income at Investec Asset Management.
"The seasonally adjusted business activity index declined slightly to 55.2 from 55.7, while the new sales orders index declined from 56.8 to 56.2, possibly under pressure from the strengthening of the rand throughout December, Roux said.
Inventory levels continued to drop and purchasing managers' purchasing commitments again declined. "Although these indices indicate some loss of momentum in the sector, they are still at relatively healthy levels," he said.
Contrary to the moderation in sales orders and output, the seasonally adjusted employment index increased slightly to 53.2 from 52.4. "Furthermore, purchasing managers have upped their expectations slightly with respect to business conditions in six months time, with 44% of the respondents expecting business conditions to improve and only 14% expecting a deterioration. These buoyant expectations and the improvement in the employment index underscore the fact that the fundamentals of the sector are still healthy," Roux said.
The PMI price index continued to decline, dropping more than 10 points from 83.5 in November to 73.4. Even though this is a significant improvement, Roux pointed out that the index remains at an elevated level.
"Taken as a whole, it is evident that business activity is cooling down somewhat. However, Decembers results do not point to a fundamental slowdown in manufacturing activity, but rather a continuation of steady growth as recorded in November," he concluded.
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