August PMI improves from July slump


ManufacturingProduction.jpgThe seasonally adjusted Absa Purchasing Managers’ Index (PMI) improved to 44 index points in August, after slumping to its lowest level since 2009 in July (42.9 points). The improvement was broad based, with four of the five major subcomponents increasing in August. However, despite ticking higher, the key sub-indices remained below the neutral 50-point mark. This suggests that the manufacturing sector is still under significant pressure and does not bode well for manufacturing output (and overall GDP) in Q3 2017.

After two months of steep declines, the business activity index edged up to 41.3 index points from 39.3 in July. However, at 41.3 points, the index is still 11 points below the level reached in May.

The new sales orders index also managed to improve, up by just by 0.3 points. However, at just 40.1 index points, the index remains indicative of very subdued demand conditions. In fact, even with the marginal improvement, the index is at a level last seen in 2009.

Furthermore, respondents turned notably more pessimistic about business conditions going forward. The index measuring expected business conditions in six months’ time declined from 51.3 to 46.6 points in August. This is the first time since February 2016 that this index slumped below the neutral 50-point mark, which signals that purchasing managers expect business conditions to worsen further through the second half of 2017.

Some of the respondents who completed the survey earlier in the month may have been concerned about the possibility of a protracted strike in the steel and engineering sector crippling output. Therefore, now that a wage agreement was reached in late August, which removes the possibility of a strike, sentiment may turn slightly more positive. Nonetheless, if the weak demand and production environment persists, a sustained improvement remains unlikely.

The inventories index rose slightly to 46.5 points in August. This was the fifth straight month that the index failed to edge above 50 points. However, with the inventories index still being well above the new sales orders index, the PMI leading indicator stayed stuck below 1 point, which does not bode well for output growth going forward.

Another factor that may have soured purchasing managers’ expectations about the trading environment going forward is renewed cost pressure. After remaining unchanged at 61.3 points in July, the purchasing price index rose to 67.2 in August.

With September’s hefty fuel price hike, costs could tick up further in the coming months.

Share this Post

Leave a Comment

Your email address will not be published. Required fields are marked *

Latest Jobs

Leaders Profile

Movers and Shakers in Procurement

Upcoming Courses

No event found!
Scroll to Top