October sees 5 major PMI subcomponents increase

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) continued its upward trend in October 2017, rising by 2.9 points to reach 47.8. This was the third consecutive increase and brought the index to its best level since May 2017. Nonetheless, the PMI remained stuck below the neutral 50-point mark.

Encouragingly, all five major subcomponents increased in October compared with the previous month, albeit that all but the suppliers’ performance index remained below the 50-point mark, said the Bureau for Economic Research (BER) in a report.

Of the five subcomponents, the new sales orders index increased the most, surging to 49.9 in October from 43.2 in September. The sharp increase was likely driven by an improvement in domestic demand conditions as respondents were slightly more negative about exports, compared with the previous month, noted BER’s report.

The improvement in demand supported an increase in output, with the business activity index rising by 2.2 points to 45. In line with the uptick in output, the employment index edged up to 44.3 index points in October.

On the back of a weaker rand exchange rate and a higher Brent crude oil price, the purchasing price index rose for a third straight month. In fact, at 73.2 points, the index is now at the highest level since June 2016, said BER.

The index tracking expected business conditions in six months’ time fell back to 51.2 in October from 52.4 points in September. This suggests that purchasing managers still expect conditions to improve going forward. Supporting this sentiment is the fact that the PMI leading indicator edged above 1, which means that new sales orders outstrip inventory levels, which usually bodes well for output growth.