PMI rebounds

2008-09-01 00:00

August witnessed an improvement in manufacturing conditions, with the seasonally adjusted Investec PMI increasing to 47 index points from 42,8 in July.

However, the composite index remains below the critical level of 50, indicative of a contraction in the manufacturing sector, Andre Roux, head of fixed income at Investec asset management, said.

Both business activity and new sales orders improved during the month. “At 87,5, the PMI price index dipped below the level of 90 for the first time in five months. The slight respite in input price pressure is likely due to the combined effect of softer international commodity prices, particularly oil, and the stronger rand exchange rate,” he said.

“The seasonally adjusted inventory index and the purchasing commitments index increased to levels above 50, hinting that purchasing managers are adopting a lightly more optimistic stance,” Roux said.

Expectations regarding business conditions in six months’ time were also adjusted upwards.

However, employment conditions within the manufacturing sector remained under pressure.

“The uptick in the latest reading and an improvement in expectations by purchasing managers does suggest that the sector may be near the bottom in the current cycle,” Roux said.

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