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PMI Points to Faltering Recovery
| News by Staff ReporterThe Kagiso PMI data was made available on 1 September 2011
The Kagiso purchasing managers index (PMI) indicated a second consecutive month of contraction in manufacturing activity, suggesting stunted growth in the SA economy.The PMI in August 2011 rose 2,5 percent month-on-month to 46,7 percent, but remains well below the 50 mark.
The PMI is seen as a reliable gauge for the health of the sector. Anything below 50 on the PMI indicates a contraction while anything above 50 indicates growth.
Growth in the second quarter of this year was seen to slow significantly, spurred on by a spate of nationwide strikes, but the data released yesterday fails to instil a sense of positivity about the third quarter forecasts.
The Kagiso purchasing managers index suggests that July’s sudden drop in manufacturing activity is not solely to blame on the strikes that month, and that the economy is unlikely to rebound in the third quarter.
According to Abdul Davids, head of research at Kagiso, “From a 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.”
The PMI data showed that while manufacturing activity contracted at a slower pace than in July the “looking forward” components of the PMI remained weak.
Expected business conditions (over the next six months) fell by nearly six points to 53,7 – which, while still above the 50 mark, is the lowest reading in two years.
New sales orders fell to 44,6, a drop of 4,2 points.
Economists are split 50 – 50 over whether the central bank will implement a further rate cut as a result of the weak economic data.
Source: www.bizpremises.co.za
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