Investec PMI stabilises at low levels

The seasonally adjusted Investec Purchasing Managers Index (PMI) declined marginally from the record lows of 36 index points set in March to 35.6 index points in April. “The latest readings provide some evidence that the severe downward pressures impacting the manufacturing sector are showing signs of moderation” said Mokgatla Madisha, portfolio manager at Investec Asset Management.

“While most indicators remain in deep negative territory, we take some comfort from the fact that they seem to be stabilising, arresting the steep declines seen at the end of 2008 and early in 2009” Madisha said. The seasonally adjusted business activity index has seen a slight uptick to 32.8 from 31.2 in March while new sales orders have seen a similar improvement over the month.

The expected business conditions index, aimed at capturing purchasing managers medium term outlook, has witnessed a further increase to 48.3 points, suggesting that the poor near-term conditions could see some improvement towards the latter part of the year. This is broadly consistent with similar global surveys.

“But,” Madisha said, “the improvements have not been uniform and the sharp drop in inventory, purchasing commitment and employment indices clearly indicate continued weak demand and an uncertain outlook for the sector”.

The continued drop in the prices index as a result of demand pressures and the firm currency is positive. “These readings are consistent with the sharp fall in the Producer Price Index (PPI) over the last few months, providing further support to continued policy accommodation by the SARB,” Mokgatla concluded.