Investec PMI stabilises in December

The seasonally adjusted Investec Purchasing Managers Index (PMI) increased marginally from its record low of 39.5 in November to reach 40.1 in December. “This reading confirms the significant pressure on manufacturing activity given both the domestic economic slowdown and the global recessionary conditions. However, it is somewhat reassuring that the index stabilised at this low level instead of dropping further, as was the case with most international PMI figures during December,” said Mokgatla Madisha, portfolio manager at Investec Asset Management.

Both the seasonally adjusted business activity and new sales orders indices remained at very low levels of 33.1 and 37.5 respectively, slightly higher than the record lows reached in November.

“Employment conditions in the manufacturing sector also continued to deteriorate, with the seasonally adjusted employment index dropping further below the critical level of 50 to 44.7,” Madisha said.

The pressure on input costs eased notably during the month, with the PMI price index declining 12.8 index points to reach 71.8 in December. “Although the rand exchange rate is hovering at weaker levels, the deflationary effect of global economic woes on international commodity prices currently outweighs the exchange rate’s impact on the prices of imported inputs,” Madisha said.

While inventory levels increased during December, purchasing commitments were once again scaled downwards, with this index declining to 41.5 from 45.5. ”Purchasing managers’ expectations regarding business conditions in six months’ time recovered somewhat after the sharp downward adjustment and record low in November, but on the whole, they remain negative and the outlook for the manufacturing sector continues to be uncertain,” Madisha said. The expectations index came in at 39.4, up from the 29.9 of the previous survey but still well below the pre-November lows of 45.