Optimism about SA manufacturing rises

Posted On Sunday, 02 September 2001 03:01 Published by
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PURCHASING managers are becoming more optimistic about the prospects for a turnaround in SA's manufacturing sector despite a slump in output in the sector, according to the latest PMI.

(note though that this is not necessarily translating to the property market with rentals and land values continuing to decline in real terms – see Rode conference notes)

PURCHASING managers are becoming more optimistic about the prospects for a turnaround in SA's manufacturing sector despite a slump in output in the sector, according to the latest Investec purchasing managers index (PMI).

The PMI, a survey of expectations for the manufacturing industry, gained four points in August after dipping dramatically in July, but at its current level of 49,6 it is still under the crucial 50-point confidence level.

A level of 50 indicates that the majority of respondents reported increased levels of activity when compared with the responses in the previous month.

John Stopford, a portfolio manager at Investec asset management, said there was still a risk that the past two months' PMI readings suggested the slowdown in manufacturing during the first half of this year may intensify in the third quarter, because the index moved sideways from April to June, mirroring actual developments in the economy.

'From this one could conclude that the pace of growth could remain unsatisfactory over the short term, despite stimulatory monetary conditions,' Stopford said.

Despite this, the PMI's gains painted a picture similar to trade data released last week: that SA is weathering the global slowdown better than many had expected it to. Investec expected the inflation outlook to improve in line with a more positive PMI.

'While producer price index (PPI) inflation statistics have disappointed market expectations in June and July, the close general correspondence between the PMI price index and actual PPI inflation suggests the latter could follow suit, creating scope for rate cuts,' he said.

The PMI price index declined again in August, dipping from 76 in July to 71,3.

Inventories, purchasing commitments and sales orders backlogs all increased in the August survey, along with the employment index, which continues to shadow developments in the labour market, where jobs continue to be shed.


Publisher: Business Day
Source: Business Day

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