Drop in orders hits factories, more decline expected
THE Kagiso Purchasing Managers' Index, a gauge of the manufacturing sector's health, fell again in April.
"The seasonally adjusted [PMI] fell for the second consecutive month, declining by 1.4 index points to reach 53.7 in April," Kagiso Asset Management head of research Abdul Davids said in a statement yesterday.
The PMI measures business conditions in the manufacturing sector. Below 50 indicates contraction in the manufacturing sector, above 50 shows expansion.
Davids said the index could drop even further, as the key forward-looking component of the index, new sales orders, declined to 55.4 in April from 59.7 in March.
The PMI leading indicator - new sales orders as a ratio of inventories - fell to below one (0.96) for the first time since December 2011.
The index measuring expected business conditions over the next six months indicated the largest decline. It dropped 6.2 points to 56.2.
The business activity index was stable at a "fairly robust" level of 57.7. This indicated sustained strong manufacturing production growth, Davids said.
The price index declined to its lowest level since January 2011 - 71.1. This index refers to a weighted average of prices paid for materials, goods and services used for conducting business.
Davids said the spiralling oil price posed a big risk to future input costs.