May 2011 PMI Report

CIPS 1 June 2011
May 2011 PMI Report
Kagiso Purchasing Managers Index - download

South Africa (Kagiso) PMI comment- Andre Coetzee: Chartered Institute of Purchasing and Supply

“The seasonally adjusted Kagiso PMI remained at a relatively high level of 55.1 index points for the third consecutive month during May. While the index has softened somewhat since hitting a peak of 57.2 in March, the May level still suggests solid growth momentum in the factory sector. The recent SA PMI developments are very much in line with the global trend, i.e. sustained high readings, albeit that the momentum for the global factory sector is also moderating.” according to the BER.

The most important PMI subcomponents remained stable at their elevated levels in May- the exception was the employment sub- index that declined to 48.7 points. This means that the manufacturing sector is still shedding jobs albeit at a slow pace. However any job losses are disturbing as we desperately need to create jobs in South Africa.

Another worrying fact is that the PMI price index remains high, and at 80 index points, point to further cost pressures in the manufacturing sector.
In my opinion the outlook for global growth is not wonderful as the worsening European debt crisis and high and volatile commodity prices may take its toll. The outlook for Japan is also fairly dismal as Japan tries to recover from the devastating effects of the earthquake and tsunami. The full extent of supply disruptions also still need to find its way through the global economy.

Despite a bleak global picture, local purchasing managers remained upbeat as evident in the surge of the expected business conditions sub- index to 66.7 from 58.1 points. This positive picture is confirmed by the PMI leading indicator (New sales orders less Inventory)

Source: BER

In conclusion, the above facts could be further evidence that the economies of developing countries may continue to outperform the economies of developed countries for time to come.

Comment: Andre Coetzee- Managing Director, CIPS, Southern Africa

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