PMI increases, but remains below 50

PMI August.jpgThe seasonally adjusted Kagiso PMI increased by 2.5 points to 46.7 index points during August, but remained below the key 50 point mark for the second month in a row, the Kagiso website reports.

The business activity index, which plunged by more than 19 points in July, recovered by 10.7 points to 46.6 during August, but still remained significantly below the strong reading of 55.2 recorded back in June. In line with the improved activity, the employment index rose by 4 index points, but at 43.1 remained at a level consistent with a weak factory sector job market.

From a GDP growth perspective, the most concerning part of the latest PMI numbers is the sharp deterioration in near-term demand, as well as the downbeat expectations for future business conditions. After declining by 9.2 index points to 48.8 in July, the new sales orders index lost another 4.2 points to 44.6 during August. The expected business conditions index lost almost 6 points to 53.7 – the weakest reading since mid-2009. The downbeat outlook was corroborated by the PMI leading indicator (ratio between new sales orders and inventories), which declined to an early 2009 low of 0.85.

Input cost pressures, as measured by the PMI price index, continued to stabilize in August.

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