An economic activity index based on a survey conducted by the Bureau for Economic Research in conjunction with the Institute of Purchasing Managers in South Africa and sponsored by Investec Asset Management.

Investec Purchasing Managers Index September 2008 

 

Executive Summary

The seasonally adjusted Investec PMI level remained unchanged at 47 index points in September. Although business activity and new sales orders remained under pressure, the results reaffirmed some of the positive trends that emerged in the August release.
These include the continuation of the deceleration in input cost inflation, with the PMI price index dropping 6 points to reach 81.5 – the lowest reading since January. Inventory levels also rose further during September.  Moreover, purchasing managers once again made an upward adjustment to their expectations regarding business conditions in 6 months’ time.
In all, the readings suggest that a bottoming out of the deterioration in manufacturing business conditions might be underway. However, the weakening global economic outlook poses a risk to producers’ near-term prospects. 

Mokgatla Madisha, Investec Asset Management

Investec PMI unchanged in September

• The seasonally adjusted Investec PMI remained unchanged at 47 index points in September. Although business activity and new sales orders remained under pressure, some of the positive trends that emerged in August were reaffirmed by the latest results.
• Input price inflation, as measured by the PMI price index, continued to decelerate on the back of slowing international commodity prices. During August, the seasonally adjusted price index came in below 90 index points for the first time in five months, and dropped a further 6 points to reach 81.5 in September. This is the lowest reading since January.
• Inventory levels also rose further, with the seasonally adjusted inventory index increasing from 53.8 last month to 55.6. However, purchasing commitments were reduced.
• Although still below the critical level of 50 index points, the seasonally adjusted employment index rebounded, rising to 46.7 during the month.
• Purchasing managers revised up their estimates of business conditions in 6 months time, with the index rising from 53.8 in August to 57.8 in September.
• The September results seem to be hinting at a bottoming out of the deterioration in manufacturing business conditions. However, the weakening global economic outlook poses substantial risk to the recovery of the manufacturing sector.

Investec Purchasing Managers Index: Results for September 2008

	2008
	Mar	Apr	May	Jun	Jul	Aug	Sep
Business Activity*	38.5	53.7	47.0	38.7	39.7	44.4	42.6
New Sales Orders*	44.0	53.2	46.3	43.0	37.9	44.0	45.3
Backlog of sales orders	36.3	43.1	40.0	35.4	35.8	37.1	40.7
Inventories*	55.4	54.0	55.4	52.1	46.2	53.8	55.6
Purchasing commitments	48.8	53.5	48.9	45.1	46.6	51.6	46.4
Expected business conditions	45.5	47.6	55.3	52.2	50.0	53.8	57.8
Suppliers' performance*	45.0	57.7	54.5	48.1	56.1	57.1	52.5
Prices	90.7	93.1	91.1	90.8	91.8	57.5	81.5
Employment*	42.9	53.2	48.8	44.0	42.4	43.6	46.7
PMI (not seasonally adj)	43.4	50.3	47.7	47.7	42.6	48.1	50.2
PMI (seasonally adj)	43.7	54.1	49.1	43.8	42.8	47.0	47.0

 *These series have been seasonally adjusted using Census X12.

New sales orders ticked up again, but business activity deteriorated

• The seasonally adjusted business activity index (signalling trends in output) declined further from 44.4 in August to 42.6.
• Although still under pressure, new sales orders ticked up again during September. The seasonally adjusted new sales orders index increased slightly to 45.3.

Inventory levels continued to recover

• Purchasing commitments dropped during September. The index fell back to 46.4 points after increasing to 51.6 in August. The drop may be reflecting some uncertainty on the part of purchasing managers. However, these managers once again adjusted their expectations regarding business conditions in 6 months’ time, upwards.
• The seasonally adjusted inventory index increased further, reaching 55.6 in September, from 53.8 previously.

PMI price index retreats further

• The PMI price index continued its retreat and dropped from 87.5 to 81.5 points on the back of slowing international commodity prices (specifically the oil price). However, the depreciation of the rand exchange rate in late September may exert some pressure over the medium term.
• Pressure on employment eased somewhat in September, with the seasonally adjusted employment index increasing from 43.6 in August to 46.7 index points.

For further information: 

Mokgatla Madisha, Investec Asset Management
Tel: (021) 416 1652

Christelle Grobler, Bureau for Economic Research
Tel: (021) 887 2810