Purchasing Managers Index drops to a record low

By Prieur du Plessis, on August 5th, 2008 posted in: South Africa Leave your comment

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By Mokgatla Madisha

The seasonally adjusted Investec PMI dropped to a record low* of 42.8 during July, down 1 index point from June’s 43.8. The further decline was on the back of a significant deterioration in demand, with the seasonally adjusted new sales orders index down sharply to a record low of 37.9.

Business activity remained lacklustre and purchasing managers reported a notable drop in inventory levels. Furthermore, downward pressure on manufacturing sector employment continued. The PMI price index increased to 91.8 on the back of firm resource prices. However, going forward, we expect some relief on the back of a somewhat weaker oil prices and recent downward trend of the rand exchange rate.

The combined effect of weak demand and high cost pressures is severely constraining manufacturing sector activity, while the weaker outlook for both domestic and global demand means at best a slow and protracted recovery of the sector.

Source: Mokgatla Madisha, Investec Asset Management, August 4, 2008

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