“What we have seen is that for the last couple of months, the PMI’s hovered around the 50 level and with this move slightly above 50 as well in November. This brings the average for the first two months for this quarter to 51.6,” Kagiso Asset Management head of research Abdul Davids told CNBC Africa.
Kagiso is one of two companies that currently provide the Purchasing Managers Index (PMI) for South Africa. HSBC’s PMI is however slightly different to Kagiso’s as it looks at the total economy, which incorporates other sectors of the economy alongside manufacturing.
“It’s been common practice in Europe and in China, for example, where you see two PMI numbers being released. It will take some time probably in the domestic market but I think there will be generally acceptance of the two,” Davids explained.
“It gives a much better picture of the overall health of the South African economy, not just the manufacturing sector as well.”
The Business Activity Index rose from 52.6 to 54.0 index points in November, and the New Sales Orders Index also increased to the current level of 51.6.
Davids added that figures from the July PMI indicated the effects of the strikes season had also significantly impacted the manufacturing sector.
“With a lot of the strikes now having come to completion, we were due for a rebound and that is born out by the GDP contribution as well, where we saw quite a significant drop in the third quarter. We expect a rebound in terms of manufacturing’s contribution to GDP in the fourth quarter of this year,” said Davids.
“Given the magnitude of the drop that we saw in the third quarter, I think we are due for quite a decent rebound in the fourth quarter as well.”
After remaining unchanged in October, the Employment Index gained 1.4 points to reach 50.8, its highest level this year. The Inventories Index rose marginally from 52.8 to 53.2.
“If you go back to the impact of the global financial crisis almost five years ago, we’ve actually recovered quite nicely. There was a period where we actually disconnected from many of our leading trading partners, and we did particularly well,” Davids explained.
“Domestic issues impacted our local performance. Unfortunately a lot of those issues were labour related in terms of their nature. A lot of that has been softened a bit by the weakness of the currency.”