South Africa’s PMI inches down to 50.4 in May, environment remains challenging

By bne IntelliNews June 3, 2013

South Africa’s seasonally adjusted Purchasing Managers’ Index (PMI) edged down by 0.1 points to 50.4 in May, staying above the 50 mark that separates expansion from contraction. However, both the business activity and new sales orders sub-indices lost ground, suggesting subdued demand in the manufacturing sector, the sponsor of the survey Kagiso Tiso Holdings said.

The headline PMI, which is a key measure of factory activity, was underpinned by robust increases for the inventory and employment subcomponents. The inventory index rose by 7.7 points to 54.7 and the employment index gained 5.1 points to a still depressed level of 47.2. The new sales orders index lost 2.6 points to 51.1, while the business activity index declined by 1.6 points to 50.6 after a solid gain in April.

The PMI indicated also that price pressures have accelerated, with the price index rising by 4.4 points to 82.4. This development can be explained by the sustained weakness of the rand.

Looking forward, the PMI gave mixed signals, as the index measuring expected business conditions in six months’ time rose for the second straight month, while the PMI leading indicator (the ratio of new sales orders to inventories) fell to below 1 again, showing that the level of purchased stock exceeded the demand for manufactured goods, which does not bode well for future factory sector production.

Kagiso Purchasing Managers Index        
  May-13 Apr-13 Mar-13 Feb-13 Jan-13
Business activity 50.6 52.2 47.7 52.2 49.6
New sales orders 51.1 53.7 52 60.2 50.9
Backlog of sales orders 37.6 38.5 40.6 36.3 30.6
Inventories 54.7 47 55.6 55.6 56.8
Purchasing commitments 50.6 48 53 54.7 43.3
Expected business conditions 54.1 51.3 47 56.8 58.2
Suppliers’ performance 50.6 54.5 51.4 51.8 48.8
Prices 82.4 78 87.3 86 82
Employment 47.2 42.1 42.6 45.7 42.3
PMI, seasonally adjusted 50.4 50.5 49.3 53.6 49.1
PMI, not seasonally adjusted 49.6 48.1 49.8 52.9 44.3
Source: Kagiso Tiso          

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