Improved optimism for future business conditions - index | Fin24

Improved optimism for future business conditions - index

Oct 02 2017 14:16
Lameez Omarjee

Johannesburg – Future business conditions are expected to improve, according to respondents of the Absa Purchasing Managers’ Index (PMI) for September.

The index, released on Monday showed that the index for future business conditions in six months’ time improved from 46.6 in August to 52.4 index points. This is above the neutral mark of 50 and the best level recorded since May 2017 which was 61.4 points.

Overall the PMI rose 0.9 index points to 44.9 in September 2017. The index was above the 50-mark in May 2017, at 51.5 points. The index has remained below the neutral point for the fourth consecutive month.

Improved new sales orders recorded the biggest increase for the month, having improved from 40.1 to 43.2 points. “While domestic demand conditions likely remained tough, some respondents noted an improvement in exports after a dip in August,” the report read.

Similarly the business activity index also rose to 42.8 points, from 41.3 reported in August. The inventories index rose by 1.7 points to 48.2 in September, and the index has been below the neutral mark for six consecutive months.

The purchasing commitments index rose from 40.3 to 45.2 points. The index is at its best level since March 2017 where it was as low as 35.9 points. 

The employment index dropped from 47 to 44.1 points. According to data from Statistics South Africa (Stats SA) jobs in the second quarter declined 34 000. The decline was mainly driven by the job shedding of 13 000 jobs in the manufacturing sector. 

The fuel hike in September also contributed to the 4.2 point increase in the purchasing price index, according to the report.

“The brent crude price also continued to tick up during the month, with the average price being more than $3 (per barrel) higher in September compared to August.

“While the rand exchange rate was, on average, slightly stronger in September compared to August, it showed renewed weakness during the end of the month,” the report read.

Dawie Maree, head of information and marketing at FNB Business Agriculture, explained that the volatile and weaker exchange rate and the higher crude oil price could lead to a rise in fuel prices for October.

“The change of season in the northern hemisphere, normally resulting in higher demand, the volatility of the rand against major currencies, and the general investor confidence may see another increase before the year is out,” he said.

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