SA purchasing activity contracts in December

18 January 2012

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18 January 2012 | Adam Leach

Purchasing activity in South Africa contracted in December bringing three months of consecutive, albeit marginal, growth to an end.

The seasonally adjusted Kagiso Purchasing Managers Index (PMI) fell by 2.2 index points to 49.4 (a figure of 50 indicates no change in activity) in the month. Both of the key sub-components, which are combined to make the overall figure, dropped with new sales orders dropping by 2.9 points and business activity dropping by 2.6 points on the previous month’s figures.

Speaking to SM, Andre Coetzee, managing director of CIPS Southern Africa, said activity in December is generally slower because of the festive season: “Traditionally, South Africa shuts down in December, so that is probably one of the reasons.”

Comparing the results for South Africa with global performance, he said: “The JP Morgan global PMI showed a recovery to 50.8 and if we look at that it’s quite concerning.

“However, if you look at the Eurozone PMI and the Chinese PMI, they are also still below 50, so I think the main contributor to the improvement in the global survey is what’s happening in the US. So in terms of what’s happening internationally we’re not too out of tune, especially looking at the UK and Eurozone.”

The Kagiso PMI also reported that the price index increased by 1.2 points to 83.3, the highest since March last year. For Coetzee, this is a particular worry: “The thing that really concerns me is the high prices, the prices index shot up again and that indicates that price pressure is coming through and in an environment where you get sub-poor growth it’s not so great.”

Overall, he saw little evidence of a strong recovery in the near term: “I’m not too optimistic for a major recovery in Q1 2012, we’re probably going to see manufacturing in South Africa meandering along either just below, or just above, the 50 mark.”

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