Seifsa concerned about lower PMI
The Barclays Purchasing Managers’ Index (PMI), which declined by almost 5% month-on-month in August, highlights “renewed pessimism” in the economy, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) said on Wednesday.
Seifsa chief economist Henk Langenhoven noted that the business activity subindex showed higher volatility again in August.
“The August level is 8.6% lower than July and, although about 7% better than in August 2014, it is still nearly 13% lower than in August 2013. The distortive effects of the [strike] instability during 2014 are still obvious,” he added.
He noted that the overall index and the business activity subindex showing that confidence in August was lower than in July was concerning.
Other concerns included that expected business conditions for the next 12 months had declined by 17%, business activity was 9% lower, supplier performance dropped by 5% and the employment indicator declined by 3.6%.
Seifsa noted that the “only ray of light” was that a new balance seemed to have been found between the new orders and inventories subindices. The former improved by 6.5% for the year, albeit only 1.6% in August, and the order backlogs had been worked down, while inventory levels had declined by 15.4% over the year.
As a result, the so-called leading indicator of the PMI improved by 20% in August and was close to 1, which meant that new orders and inventories were in balance.
“Future data releases will tell us whether a lower turning point has been reached or more pain is in store for the sector,” Langenhoven stated.
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