Kagiso PMI declines to four-year lows at 45.4 points in April

Weak manufacturing output does not bode well for economic growth.

The Kagiso purchasing managers index (PMI)‚ which gauges activity in manufacturing‚ fell to 45.4 in April from 47.9 in March. A below-50 reading suggests activity is contracting.

The fall in the PMI was mainly driven by a four-point decline in the business activity subindex - its lowest since July 2011.

"While the manufacturing sector seems set to contract on a quarterly basis in the first quarter of 2015 (barring a remarkably strong performance in March)‚ the April PMI suggests that a quick recovery is unlikely. In fact‚ conditions could worsen further in the second quarter‚" said Kagiso Asset Management head of research Abdul Davids.

The employment subindex remained well below the 50-point mark at 45.2 points‚ confirming the subdued trend in employment conditions.

Davids said April had been a tough month for manufacturers due to the intensity of load-shedding and‚ to a lesser extent‚ the large number of public holidays.

"This not only directly hampered output‚ but also weighed on domestic demand and likely contributed to the 6.7-point drop in the new sales orders index (currently at its lowest level since August 2009)‚" he said.

New sales orders and business activity subindices are the two largest subcomponents of the PMI.

The price subindex continued to rise. It lifted to 69 index points in April from 67.9 in March.

Petrol prices have started to increase on higher oil prices‚ adding to the cost pressures on producers.

The price subindex is likely to move upwards in the months ahead due to expected increases in petrol and diesel prices.

Purchasing managers remained pessimistic about the future. The index measuring expected business conditions in six months' time declined for a third month in a row to 56.3 points in April.

Source: BDpro via I-Net Bridge