The seasonally adjusted Kagiso PMI stayed at extremely low levels in July, declining from 37.9 during June to 37.3 index points – the persistent weak readings and the associated contraction in manufacturing output are disappointing especially since the global PMI has already reached levels above 45 index points. An analysis of the apparent divergence between the SA and global PMI is provided at the end of the report.
After moderating in the last number of months, the pace of output volume decline accelerated again as the seasonally adjusted business activity and new sales orders indices dropped from 37.9 to 33.8 and 38.2 to 35.8 respectively. This is the worst of the bad news.
On a less pessimistic note, July saw increases in the backlog of sales orders, the seasonally adjusted inventories index and purchasing commitments. Although these increases are welcome, the levels still indicate contractions in all of the near-term demand indicators.
The seasonally adjusted employment index rose from 36.9 to 40.8, raising hopes that the worst of the lay-offs in the manufacturing sector are behind us for 2009.
For the 5th successive month, purchasing managers have become more hopeful for a better second half of 2009 – the expected business conditions index increased from 52.8 to 55.1 points.
Source: Kagiso Securities, July 31, 2009.
