Johannesburg - The Kagiso Purchasing Managers Index (PMI), a
gauge of the manufacturing sector's health, dropped back into negative
territory in September.
"The seasonally adjusted Kagiso PMI lost four index
points in September and declined back below the key 50 point mark to
46.2," said Andre Coetzee, MD of the Chartered Institute of Purchasing and
Supply, on Monday.
The PMI measures business conditions in the manufacturing
sector. Below 50 indicates contraction in the manufacturing sector, above 50
shows expansion.
The PMI also fell below 50 in June to 48.2, while the rest
of the year it has been above 50.
Coetzee said the PMI reading did not bode well for output in
the factory sector in the third quarter of 2012.
Manufacturing production declined by one percent quarter-on-quarter,
on an annualised basis, during the second quarter.
"Based on the PMI, the deterioration in the local
manufacturing sector has been stark in recent months," said Coetzee.
"Following an average level of 54.7 points during the
first five months of 2012, the PMI lost ground and only averaged 48.9 between
June and September 2012."
It averaged 51.8 in the second quarter, but dipped below 50,
on average, in the third quarter of the year.
The PMI is now in line with the manufacturing trends of
South Africa's key trading partners. China's September PMI reading is 49.8
while the European Union's remains below 50.
The PMI is made up of nine indices.
The business activity index fell by a
"significant" 7.6 index points to 43.
"One has to go back to July 2011 - a period when the
manufacturing sector was hit by widespread industrial action - to find the
index at a weaker level," Coetzee said.
The activity sub-index was responsible for almost half of
the overall PMI decline.
Business activity measured 48.1 for the third quarter as a
whole.
This was down from 53.6 during the second quarter and 58.9
in the first three months of the year.
New sales orders lost 0.7 index points to drop to 46.2.
"Another important feature of the September PMI was
that the price index increased further after the 8.2 index point jump recorded
in August," said Coetzee.
The price component rose by another 4.9 points to 75.8 - the
highest level since January 2012.
Employment also fell in September.
"The August increase to back above 50 for the PMI
employment index proved to be short-lived. The index lost 4.5 index points to
46.5," said Coetzee.
However, future business conditions were rated more
positive.
The expected business conditions index gained 2.6 points to
55.5 during September.
"The somewhat more upbeat prospects were corroborated
by the PMI leading indicator, which rose from 0.90 in August to just below 1 at
0.99.
"The leading indicator measures the ratio between new
sales orders and inventories - any number below one indicates that inventories
exceed the demand for manufactured goods, which normally does not bode well for
factory sector production," Coetzee said.
The PMI is based on a survey conducted monthly by the Bureau for Economic Research at the University of Stellenbosch and the Chartered Institute of Purchasing and Supply.