Blackouts plunge PMI to 2003 level
March 4, 2008
By Gordon Bell
Johannesburg - The purchasing managers' index (PMI) fell to a four and a half-year low of 46.4 last month, knocked by slowing demand and the power shortage, sponsor Investec said yesterday.
The fall in the measure of manufacturing activity from 52.1 in January reflects fewer new sales orders and marks the first decline below the 50 mark, which separates expansion from contraction, since 2003.
The index is at its lowest level since September 2003.
"In all likelihood, the decline reflects not only the effect of softening in the real economy, but also the impact of the electricity crisis in the sector," said Andre Roux, the head of fixed income at Investec Asset Management.
Mines were forced to halt production for five days in January after Eskom said it could not guarantee supply. Mining output is forecast to fall this year, while manufacturers have also been hard hit.
Investec said the seasonally adjusted business activity index dropped to 42.4 from 50.5, its lowest level since the survey started in 1999. New sales orders dropped to 46.2.
"This index is now in line with readings posted in 2003, when the manufacturing sector was in recession," Roux said.
The tight business conditions were aggravated by a significant increase in input price inflation, with that index surging from 79.5 to 86.8 in February.
Targeted CPIX inflation jumped to 8.8 percent year on year in January, a near-five-year high, spurred by sharply rising fuel and food prices.
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