South African PMI surges in September

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By André Coetzee, Kagiso Securities.

After remaining stuck below 40 index points between February and August 2009, the seasonally adjusted Kagiso PMI posted the second biggest monthly increase on record (8.7 points) to reach 48.0 during September. The latest reading is the highest since May 2008 and indicates that SA’s manufacturing sector – after an initial lag – is catching up to the sharp PMI gains witnessed in our major trading partners in the last number of months. The global PMI rose to 53.1 index points during August 2009.

The September SA PMI data is particularly encouraging given signs of life in almost all of the sub-indices. Especially noteworthy is that output volumes did not contract any further: the seasonally adjusted business activity and new sales orders indices rose from very low levels to 49.4 and 50.7 respectively.

Near-term demand indicators also bounced back from their previous lows: the seasonally adjusted inventories index increased from 37.0 in August to 47.6 points during September. The backlog of sales orders and purchasing commitments indices increased by similar magnitudes, rising to 34.4 and 44.3 index points respectively. Job losses slowed down with the seasonally adjusted employment indexincreasing to 42.7 points – the highest since January 2009 – from 37.5 in August.

Purchasing managers’ optimism regarding business conditions in 6 month’s time continued to increase: the index rose for the seventh consecutive month to 70.3 during September. One has to go back to February 2007 to find expectations at a higher level.

pmi-september-2009

Source: Kagiso Securities, September 30, 2009.

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