September 2019 PMI continues decline

The employment subcomponent rose slightly, but at 39.6 points, remains at a very weak level.

Besides sustained weak domestic demand conditions, the poor South African manufacturing PMI comes against a backdrop of growing concerns about the health of the global economy and, in particular, South Africa’s trading partners in Europe.

The preliminary manufacturing PMI reading for the Eurozone fell to the weakest level in more than seven years in September, with the German PMI dropping to its lowest level in more than a decade.

It is unlikely that the South African manufacturing sector will improve on a sustained basis at a time when our key trading partners are struggling. Indeed, while the September PMI already paints a dismal picture of current conditions, respondents expect the environment to worsen further going forward.

The index tracking expected business conditions in six months’ time, declined for a fourth month to 46.1 index points in September.

The purchasing price index increased by 3.1 points to 76.7 points. With purchasing prices increasing at a faster rate than before, manufacturers’ profitability levels are likely under increased pressure as the sustained weakness in demand suggests little pricing power to pass on the higher costs to consumers.

This article was originally published here