Investec PMI declines for third consecutive month
During June the seasonally adjusted Investec Purchasing Managers Index declined for the third consecutive month, dropping 1.2 index points to 56. The largest detractors were the deceleration in business activity and the drop in inventories, each deducting around 0.7 percentage points from the index, said Vivienne Taberer, portfolio manager at Investec Asset Management.
The business activity index declined to 56.4 from 59.2, while the inventory index slid more than 6 index points to 54.4 from 60.9
Growth in new sales orders also moderated in June, with the new sales orders index declining to 57 from 58.5 in May. This resulted in a decline in the backlog of sales orders. Furthermore, suppliers performance improved.
"A firmer domestic currency may have exerted some pressure on the performance of domestic manufacturers," Taberer said.
The PMI price index was pushed higher during June, increasing to 84.7. "The month saw a reacceleration in the international oil price on the back of renewed instability in Nigeria coupled with the low stocks of gasoline in the US at the start of their driving season. In addition, commodity prices remained resilient. This is likely to exert further pressure on producer prices," Taberer said.
"On the positive side, however, the seasonally adjusted employment index surprised on the upside by increasing to 55.0 from 51.2 in June. This move reverses the declines witnessed in April and May, restoring the index to a level well above the critical level of 50," she added.
Apart from the price index, all the sub-indices remain around healthy levels, Taberer pointed out. "However, the growth tempo in the sector has moderated noticeably over the past three months. Furthermore, the results do raise some concerns near term: inventories are down sharply, purchasing managers adjusted their purchasing commitments downwards and expectations for business conditions in six months time have weakened," Taberer concluded.
Table and graph to follow:
Investec Purchasing Managers Index: Results for June 2007
| 2006 | 2007 | ||||||
| Dec | Jan | Feb | Mar | Apr | May | Jun | |
| Business activity* | 55.2 | 62.7 | 63.1 | 64.1 | 60.8 | 59.5 | 56.4 |
| New sales orders* | 56.2 | 56.9 | 64.3 | 64.2 | 58.3 | 58.5 | 57 |
| Backlog of sales orders | 48.4 | 54.5 | 51.2 | 51.9 | 45.6 | 48.9 | 41.3 |
| Inventories* | 56.5 | 64.9 | 61.2 | 55.6 | 62.2 | 60.9 | 54.4 |
| Purchasing commitments | 55.6 | 62.1 | 62.8 | 59.1 | 54.9 | 56.5 | 51.1 |
| Expected business conditions | 65.1 | 67.9 | 71.5 | 66 | 69.4 | 67.7 | 65.9 |
| Suppliers performance* | 52 | 51.1 | 50.6 | 52.6 | 54.2 | 56.5 | 55.8 |
| Prices | 73.4 | 76.8 | 73.8 | 76.2 | 80.2 | 81.2 | 84.7 |
| Employment* | 53.2 | 51.2 | 58 | 58.7 | 54.4 | 51.2 | 55 |
| PMI (not seasonally adj.) | 58.7 | 50.6 | 57.8 | 59.1 | 54 | 55.5 | 54.4 |
| PMI (seasonally adjusted) | 54.8 | 57.2 | 60.3 | 60.5 | 57.9 | 57.2 | 56 |
| * These series have been seasonally adjusted using Census X12. | |||||||
The survey is conducted on a monthly basis by the Bureau for Economic Research at the University of Stellenbosch in conjunction with the Institute of Purchasing Managers in South Africa and sponsored by Investec Asset Management.
