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SA's manufacturing recovery not as good as previously thought‚ says BER

7 Nov 2014

The suggestion that SA's manufacturing recovery is proving more robust than expected was dealt a blow on Wednesday, 5 November 2014, when the Bureau for Economic Research (BER) corrected and revised down the October Purchasing Managers Index (PMI) from 51.8 to 50.1.

SA's manufacturing recovery not as good as previously thought‚ says BER

Apologising for the error, BER senior economist Hugo Pienaar explained that once a year the BER updated the seasonal factors used to adjust the individual PMI indices to include the factors for the latest 12-month period. This normally resulted in minor adjustments to the historical numbers.

"Unfortunately, this time there was a mistake with the calculation of the seasonal factor for the new sales orders index", he said.

None of the other subcomponents were affected. However, because of its large weighting (30%) in the headline PMI index, the error with new sales orders also influenced the headline PMI figure.

The upshot is that the corrected headline PMI improved from 49.5 in September 2014 to 50.1 during October 2014 and not from 50.8 to 51.8 as originally reported.

What did not change was the PMI's trajectory - October was still the third consecutive monthly rise in the index so the inference that manufacturing conditions were improving still held, Pienaar said.

Also unaffected was the fact that producers hadn't been this optimistic since the start of the year, based on the 5.1-point rise to 60.4 in the sub-index measuring expected business conditions in six months' time.

"It is a very modest recovery but the trends are still the same," said Pienaar. "I would still expect the manufacturing sector to look a lot better in the fourth quarter than in the third unless load shedding becomes more pervasive."

Source: BDpro via I-Net Bridge

Source: I-Net Bridge

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