The seasonally adjusted Kagiso PMI rose by 2.2 index points to reach 52.5 in December 2009 – this is the first time since January 2008 that the PMI has remained above the key 50 point mark for two consecutive months.

Both the business activity (55.1) and new sales orders (54.7) indices indicate that output volumes increased during December.

The positive trends seen in output are also visible in near-term demand indicators. The backlog of sales orders index (44.0) indicates that manufacturers are consistently busier than during 2009H1.  Also, the increase in the seasonally adjusted inventories index (55.6) shows that the improved demand conditions are expected to continue.  Purchasing commitments (49.5) remained resilient compared to earlier in 2009.

The improvement in production activity was accompanied by a drop in the rate of retrenchment. The seasonally adjusted employment index rose for the 4th consecutive month and at 48.2 is now close to neutral.

The PMI price index increased further in December, suggesting that producer price deflation may soon be something of the past. Purchasing managers remained positive about future prospects with the expected business conditions index rising to 69.5 from 65 points.

                                                                                                                                                      André Coetzee, Kagiso Securities