Investec Purchasing Managers Index contracts sharply

By Prieur du Plessis, on March 3rd, 2008 posted in: South Africa Leave your comment

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By Andre Roux

The seasonally adjusted Investec PMI sunk to 46.4 in February, well below the critical level of 50. In all likelihood, the decline reflects not only the effect of a softening real economy, but also the impact of the electricity crisis on the sector.

Both output and new sales orders contracted during the month and the tight conditions were aggravated by a significant increase in input price inflation. The seasonally adjusted employment index plunged to 44.1, after coming in above the critical level of 50 index points for 20 consecutive months. This may mark the beginning of cutbacks in employment in response to the deterioration in business conditions.

The results indicate that the manufacturing sector is taking strain. Purchasing managers expect conditions to improve somewhat in the next few months. However, their expectations with respect to conditions in 6 months’ time were adjusted downwards to the lowest level since 1999.

Source: Andre Roux, Investec Asset Management, March 2008.

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