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Index shows higher expectations about business conditions in SA

Oct 04 2016 08:00
Carin Smith

Cape Town - A sub-index tracking expected business conditions in six months' time is now at the highest level - 63.8 points - since the start of 2015, according to the Barclays Purchasing Managers' Index (PMI) released on Monday.

The report on the index said the more upbeat sentiment could be driven by less pressure on costs, as a related price sub-index fell for a third straight month to the lowest level in almost six years.

According to the report, this is likely driven by the rand exchange rate remaining relatively firm from August to September as well as two months of declining fuel prices.

Respondents taking part in the survey for the latest Barclays PMI reported higher export orders despite the slightly stronger rand exchange rate. The PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research at the University of Stellenbosch and sponsored by Barclays.

It is also expected that some manufacturers may benefit from a possible turnaround in the agriculture sector as the impact of the drought diminishes.

At the same time, the Barclays PMI indicates that there has likely been a slowdown in actual quarter-on-quarter manufacturing growth after a solid performance in the second quarter.

The seasonally adjusted PMI rose by 3.2 points to reach 49.5 index points in September.

READ: Private sector activity was subdued in July: PMI

Barclays pointed out in the index report that the September reading, as well as the average for the third quarter, are below the neutral 50-point mark. On top of that, the average reading in the third quarter was well below the second quarter average.

Four of the five main PMI sub-indices increased in September, but only the business activity and suppliers performance sub-indices were above 50 points. The new sales orders sub-index continued to point to subdued demand.

In contrast, the inventories sub-index edged back above the level of the new sales orders index.

"This does not bode well for output growth going forward," cautioned the index report.

In September the employment sub-index fell below 50 for the first time since June. 

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barclays  |  ber  |  business confidence  |  sa economy
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