October PMI signals slow but sustained manufacturing sector recovery

03 November 2014

The seasonally adjusted Kagiso PURCHASING MANAGERS’ INDEX™ (PMI™) rose for a third consecutive month in October and increased to 50.1 index points. The rise brought the index to its best level since March 2014 and signalled an improved start to the fourth quarter. 

The new sales orders index rose to 50.2 index points from a downwardly revised1 48.7 previously. The increase confirms that domestic demand is slowly recovering from production stoppages related to industrial action in the mining and manufacturing sectors during the first seven months of 2014. Furthermore, the inventories index rose sharply, which suggests that purchasing managers are confident that demand will be sustained going forward. This is supported by the 5.1 index point rise to 60.4 in the index measuring expected business conditions in six months’ time. However, inventories well exceeded new sales orders and the PMI leading indicator fell further below 1.

The muted rise in demand was consistent with output that remained lacklustre. The business activity index nudged down from 50.5 to 50.3 in October. Even though the activity index remained subdued, it was almost 10 index points higher than a mere three months ago. Factory employment conditions also deteriorated slightly as the index declined from 47.5 to 46.1 index points. 

The price index fell to 76.0 after four consecutive increases. Lower domestic petrol and diesel prices on the back of the sharply lower international crude oil price, as well as a slight strengthening of the rand exchange rate, likely alleviated some of the cost price pressures.