Tide turning for manufacturing?

"Although business activity and new sales orders remained under pressure, some of the positive trends that emerged in August were reaffirmed by the latest results," said Mokgatla Madisha, portfolio manager at Investec Asset Management.

The seasonally adjusted business activity index, which signals trends in output, declined further from 44.4 to 42.6, but new sales orders ticked up slightly during September, with the index increasing to 45.3 from 44.

Input price inflation, as measured by the PMI price index, continued to decelerate and dropped from 87.5 to 81.5 on the back of slowing international commodity prices, particularly the oil price.

"However, the depreciation of the rand exchange rate in late September, spurred by global financial turmoil, may cause pressure on input prices to reaccelerate if rand weakness persists," Madisha said.

"Pressure on employment eased somewhat in September," he added.

Although still below the critical level of 50, the seasonally adjusted employment index gained further momentum, rising to 46.7 during the month.

Inventory levels also rose further during September, with the seasonally adjusted inventory index increasing from 53.8 to 55.6.

In addition, purchasing managers have once again adjusted their expectations regarding business conditions in six months' time upwards, with the index increasing from 53.8 to 57.8.

"In all, the Investec PMI results seem to be hinting at the bottoming out of the deterioration in manufacturing business conditions. However, the weakening global economic outlook poses a risk to the recovery of the manufacturing sector," Madisha concluded.

- I-Net Bridge