PMI 'extremely low'

Johannesburg - The seasonally adjusted Kagiso PMI stayed at extremely low levels in July, declining from 37.9 during June to 37.3 index points.

The researchers said the persistent weak readings and the associated contraction in manufacturing output are disappointing, especially since the global PMI has already reached levels above 45 index points.

After moderating in the last number of months, the pace of output volume decline accelerated again as the seasonally adjusted business activity and new sales orders indices dropped from 37.9 to 33.8 and 38.2 to 35.8 respectively. "This is the worst of the bad news," said Andre Coetzee from Kagiso.

On a less pessimistic note, July saw increases in the backlog of sales orders, the seasonally adjusted inventories index and purchasing commitments.

"Although these increases are welcome, the levels still indicate contractions in all of the near-term demand indicators," Coetzee said. The seasonally adjusted employment index rose from 36.9 to 40.8, raising hopes that the worst of the layoffs in the manufacturing sector are behind us for 2009.

The PMI price index, in line with PPI movements, shows that input cost pressures have been declining since 2008Q4. This time around the index dropped from 51.7 during June to 48.7 in July, providing some relief from the tough business conditions.

For the fifth successive month, purchasing managers have become more hopeful for a better second half of 2009 - the expected business conditions index increased from 52.8 to 55.1 points.

"The recent lacklustre performance of the PMI at a time when the global PMI has increased robustly (from 33.7 points in December 2008 to 46.9 during June 2009) is disappointing," said Coetzee. SA, however, does lag the global manufacturing (and general business) cycle.

- I-Net Bridge