Investec PMI declines by 2.6 index points

The seasonally adjusted Investec Purchasing Managers Index (PMI) declined by 2.6 index points to 57.9 in April. "The main contributor to the decline in the overall Investec PMI was slower growth in new sales orders," said Vivienne Taberer, portfolio manager at Investec Asset Management.

The seasonally adjusted new sales orders index declined from 64.2 to 58.3.

"The strengthening of the rand exchange rate during the month would have increased import competition within the sector," she said.

In line with the slower growth in new sales orders, output also slowed, with the seasonally adjusted business activity index declining to 60.8 from 64.1.

Coupled with the deceleration in activity, the seasonally adjusted employment index declined from its historical high in March of 58.7 to 54.4. "However, even though manufacturers created employment at a slower pace in April, it is reassuring that they continue to do so even when business activity slows down somewhat," Taberer said.

Price pressures accelerated once again during April, with the PMI price index reaching 80.2. "The month saw continued upward pressure on commodity prices, including the international oil price. High fuel prices may have a negative effect on other input costs," Taberer said.

The backlog of sales orders decelerated, with this index now at 45.6 from 51.9. Inventories recovered during April, and the seasonally adjusted inventory index is now at 62.2. According to Taberer increased inventories usually signal purchasing managers expectation of positive conditions ahead: six-month expectations did pick up, however, purchasing managers purchasing commitment declined, with this index moving from 59.1 to 54.9.

"In all, the results portray less favourable conditions within the sector. Given the level of the exchange rate and continued pressure on input costs, these conditions may persist over the short term," she concluded.