Investec PMI plummets to a record low

The seasonally adjusted Investec Purchasing Managers Index plummeted to 39.5 in November, falling below 40 for the first time since the survey commenced in September 1999.

“The results, while sharply weaker, are in line with similar surveys across both developing and developed economies. The drop, from 46.2 in October, reflects the further weakening of both the domestic and international economic outlook,” said Mokgatla Madisha, portfolio manager at Investec Asset Management.

“Business conditions deteriorated significantly during the month, with the business activity as well as the new sales orders indices also hitting record lows, declining to 30.6 and 35.8 on a seasonally adjusted basis respectively,” he added.

The PMI price index declined marginally to 84.6. “November did not witness any significant respite in input cost pressures, as domestic currency weakness offset some of the drop in international commodity prices. However, we do expect the index to moderate from hereon,” Madisha said.

At 46.4, the seasonally adjusted employment index came in slightly lower than the October and September readings. “The index remains below the critical level of 50, suggesting that jobs continue to be shed in the manufacturing sector.”

”The clearest indication that purchasing managers are bracing themselves for an even weaker environment going forward is the significant adjustment of expectations regarding business conditions in six months’ time. The expectations index collapsed by almost 20 index points to 29.9, its lowest level ever,” Madisha said.

“Given the sharp domestic and global economic slowdown, the manufacturing sector continues to operate under severe pressure. While managers seem positioned for further deterioration in business conditions, the sector may face further headwinds over the medium term,” Madisha concluded.