Investec PMI dips to 46.2
Tue, 04 Nov 2008
The seasonally adjusted Investec Purchasing Managers Index dipped 1.5 index points from a revised 47.7 in September to reach 46.2, Investec Asset Management said on Monday.
"The decline in the Investec PMI reflects the challenging economic environment facing producers during the month, as the domestic cyclical downturn in economic activity was compounded by the global economic crisis," said Mokgatla Madisha, portfolio manager at Investec Asset Management.
"Not only is domestic demand slowing, but there is increasing evidence of further moderation in growth by our most important trading partners," he added.
New sales orders took a knock during the month, falling 3.7 points from a revised 46.5 to 42.8, thereby contributing more than 1 index point to the drop in the overall index.
In line with waning demand, output volumes deteriorated further. The seasonally adjusted business activity index declined to 42.5 from a revised 43.7 in September.
After retreating to 81.5 in September, the PMI price index re-accelerated to 85.7.
"Even though dollar-based commodity prices declined further in October, the rand collapse resulted in renewed pressure on the costs of imported inputs," Madisha said.
According to Madisha the noticeable drop in inventory levels and reduction in purchasing commitments in October suggest caution on the part of purchasing managers, uncertain about the extent of the global economic slowdown and the likely impact on the domestic economy.
"The risks are clearly on the downside.'
The deterioration in business conditions did not spark a further acceleration in retrenchments within the manufacturing sector, with the seasonally adjusted employment index remaining unchanged from the revised September level of 47.1.
However, the index remained below the 50 point mark, indicating negative pressure on employment growth in the sector.
"It became evident in October that the world economy may be in for a severe slowdown, which is likely to postpone the recovery of the manufacturing sector.
"While the August to October PMI readings reveal a measure of resilience, purchasing managers have adjusted their expectations regarding business conditions in six months' time downwards, with the expectations index plunging from 57.8 to 45.9," Madisha said.
The PMI survey is conducted on a monthly basis by the Bureau for Economic Research at the University of Stellenbosch in conjunction with the Institute of Purchasing Managers in South Africa and sponsored by Investec Asset Management.
