PMI level above 50 points

CIPS 3 October 2011

PMI level above 50 points

Kagiso purchasing managers index bucks the global trend by gaining 4 points in September, moving back above the key 50 index point mark

Kagiso’s purchasing manufactures index (PMI) rose by four points in September to move above the key 50 point mark to 50,7 points.

Kagiso says this is the second consecutive month that the index has recorded a rise.

A reading below 50 implies a contraction, while one above 50 implies expansion.

The PMI recovery in September is against the global trend, with euro zone data released by Markit Economics putting the region’s final PMI at a 25-month low of 48.5 in September, above its flash estimate of 48.4. US and Chinese manufacturing growth is also moderating leading to concerns about the sustainability of the local PMI recovery

Brait economist Colen Garrow said: "The PMI trend is still terrible. We must not be blinded by one month's good figures."

He said he saw the rest of the year recording poor economic growth. "The global background is arguing for a weak PMI. We see evidence of a weak consumption side on our economy," he said.

With the exception of the employment index, which remained stuck at very depressed levels, most of the other PMI sub-components also painted a more optimistic picture relative to the previous two months.

Kagiso’s Business Activity Index (BAI) rose by 7 points to 53,4 points.

Abdul Davids, the head of research at Kagiso Asset Management, said the BAI recovered almost all of the points it lost since July this year when it fell by as much as 19 points.

Kagiso’s New Sales Orders (NSO) gained 4,3 points but remained below the 50 point mark at 48,9 points.

Davids says believes that despite the slight recovery in September the next couple of months will still be hard on the PMI level.

"While a key short-term domestic constraint to production is now out of the way, soft global demand should ensure that the SA PMI remains relatively depressed in the foreseeable future," he said.

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