PMI suggests stagnant factory sector output
Abdul Davids, the Head of Research at Kagiso Asset Management, said that ‘for the last two months, the PMI has suggested stagnant month-on-month factory sector output’.
A positive development was that new sales orders rose for a second consecutive month to reach 51.6 points, reflecting a gain of 1.3 index points. Davids commented that ‘the level of the index suggests a mild increase in the demand for SA produced factory goods from the September level’.
On a more negative note, Davids pointed out that the business activity index declined slightly to 50.9, confirming that manufacturing production, although not declining, is only just in positive territory.
Other notable trends from the October results are that the expected business conditions index posted a second gain in a row to 62.4 as purchasing managers were somewhat more optimistic about future prospects.
Davids highlighted the fact that the most significant move in October was for the price index, which rose by 8.2 index points to 82.1 – the highest level since April 2011. The sustained weaker level of the rand exchange rate versus the US dollar may provide some explanation for the relatively sharp rise in the price index.