Purchasing Managers Index rebounds

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By Andre Roux

The seasonally adjusted Investec PMI increased to 54.1 in April, after dropping to 43.7 in March. The rebound may be largely ascribed to the unusual timing of Easter during 2008. This would have artificially depressed the March reading while explaining a concomitant sharp increase in April. It is therefore more appropriate to analyse the recent trend by looking at the two-month combined reading. The average March and April reading is somewhat firmer than February, but points to continued pressure on the manufacturing sector.

Business activity and new sales orders indices, while somewhat firmer in April, remain below the 50 level on the two-month average. Rising purchasing commitments coupled with a slight upward adjustment of expected business conditions point to a sector that may weather a sharp and prolonged downturn.

However, high input costs (the PMI price index currently stands at 93.1), various capacity constraints (like skills shortages, unreliable electricity supply etc.) as well as a moderating demand backdrop is likely to rule out a strong and sustained recovery in the near term.


Source: Investec Asset Management, May 7, 2008.


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