South African PMI shows continued improvement

By Prieur du Plessis, on December 2nd, 2010 posted in: South Africa

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By André Coetzee of Kagiso Securities.

The seasonally adjusted Kagiso PMI bounced back in November, rising by just more than 3 index points to reach 52.9. The November gain followed two consecutive months of below 50 readings that suggested factory output was contracting.

The business activity index, which already moved higher in October following strike-induced declines during August and September, posted a robust gain of 6.1 index points to reach 54.8 in November. One has to go back to 2010Q1 to find the index at a higher level.

New sales orders also continued to improve, reaching 56.5 (+5 index points). Together, business activity and new sales orders are responsible for 55% of the headline PMI and were mainly responsible for the move above 50 seen for the overall index.

A further encouraging development is that purchasing managers expect the improved conditions to last – the expected business conditions index gained 4.3 points to 64.6 (the highest level since April) in November.

Although remaining below the key 50 mark, another heartening sign in November was that the employment index rose by 2.8 index points to 47.6. Purchasing prices picked up strongly with the PMI price index increasing to 61.8, up by 5.4 index points compared to October.