Kagiso PMI recovers to 50.7 in September

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September was the first time in five months that the index was above 50. A reading of below 50 points to contraction in manufacturing activity while that above 50 indicates an expansion in manufacturing activity.

Chartered Institute of Purchasing and Supply (CIPS) Africa MD André Coetzee said that the Kagiso PMI still only averaged 48.5 in the third quarter‚ despite improving in September‚ suggesting that "manufacturing output‚ in all likelihood‚ continued to subtract" from gross domestic product (GDP) in the third quarter.

The rise in the index was mainly driven by a significant improvement in business activity‚ which had fallen significantly when workers in the steel and engineering sectors went on strike.

The business activity subindex rose 5.6 index points to 53 in September‚ recovering from a three-year low of 39.4 in July and 47.4 in August.

However‚ Coetzee said the uptick in business activity was not backed by an improvement in demand as the subindex for new sales orders remained just below 50 in September.

But he said the 48.3 index point average in the third quarter was higher than the average of 44.1 in the second quarter of 2014‚ suggesting a slow pick-up in demand that was "expected to be sustained during the remainder of the year".

The employment subindex improved from 44.9 to 48.8 index points in September supported by higher output levels. The index‚ however‚ remained below the key 50-point level for a sixth consecutive month.

The price subindex edged up for a fourth consecutive month to 78.6 from 77.3 index points previously. Coetzee said subdued international oil prices offered support‚ but the weakening rand was offsetting the gains.

The subindex measuring expected business conditions in six months' time fell back to the July level of 55.3 index points‚ in line with the PMI leading indicator that also deteriorated slightly as inventories continued to outstrip new sales orders.

Source: BDpro via I-Net Bridge