PMI drops to its lowest level in just under three years

05 May 2014

The seasonally adjusted Kagiso PURCHASING MANAGERS’ INDEX™ (PMI™) declined by 2.9 index points to 47.4 in April - its lowest level since July 2011. A broad range of PMI subcomponents lost ground in April. Andre Coetzee, Managing Director of CIPS Africa, says the April reading suggests renewed pressure in the local factory sector. “The level of the South African manufacturing PMI is in sharp contrast to the developed economies. In the US, the ISM manufacturing index rose to 54.9 index points from 53.7 previously, while the Eurozone manufacturing PMI stood at 53.4 in April - signalling expansion for 10 straight months,” Coetzee notes. However, the Chinese preliminary manufacturing PMI only rose marginally to 48.3 index points in April.

In South Africa, the New Sales Orders Index shed 3.1 index points to 43.5, remaining below the neutral 50-point mark for a second month running. “It’s likely that some producers experienced lower demand for their products due to the prolonged production stoppages in the platinum mining sector,” according to Coetzee.

A significant development in April was the sharp decline in the Price Index, to 79.3 index points from 93.0 index points in March. Coetzee comments: “While the decline was somewhat sharper than expected, the slight drop in the diesel price in April, as well as the slightly stronger rand exchange rate, likely contributed to the moderation in the rate of increase in input prices.” 

After nudging above the neutral 50-point mark in March, the Business Activity Index dipped back below 50 index points. It declined by 2.5 index points to 48.5 in April.  “Barring the (still subdued) 51 index point reading in March, the index has signalled a slowdown in production since December 2013,” Coetzee points out. In line with lower activity levels, the Employment Index dropped 7.2 index points to 44.6 - the lowest level since April last year. The Inventories Index declined slightly to 52.5 index points

While the index measuring Expected Business Conditions in six months’ time remained largely unchanged at 54.2 index points, the PMI Leading Indicator (the ratio between new sales orders and inventories) fell further to a level below 1. This implies that inventories were relatively high compared to the demand for manufactured goods and “normally does not bode well for production going forward,” Coetzee concludes.      

Download: april_2014_pmi.pdf