The overall index dropped by 3,3 points in December, which translates into a 5,8% decline. On average, the year ended 4% lower than 2013. The December business activity sub-index of the PMI recorded almost a 14% decline on November 2014. “This is of serious concern as it reflects the expected impact on production trends in the metals and engineering sector,” SEIFSA Chief Economist Henk Langenhoven said.
Mr Langenhoven reiterated SEIFSA’s statement, first made last year, that medium-term trends in the business activity sub-index level and its rate of change seemed to have bottomed up in the middle of 2014.
“The continuation of this improvement is crucial since it leads metals and engineering production trends by 12 to 18 months. Although the trends remained positive, the December numbers have raised uncertainty significantly and may indicate that a substantive recovery will be delayed further than 2015,” said Mr Langenhoven. He added that the declines in all the comparative periods were considerable:
- December was 13,8% lower than November,
- The average for the full year was 7,4% lower than 2013’
- December 2014 was nearly 5% lower than December 2013, and almost certainly indicates continued depressed production numbers for the sector in December.
The positives reflected in the numbers are shown by expected business conditions improving by near 24%, suppliers performing better and order backlogs declining. In contrast, purchasing commitments declined – as did new orders – which shows lower expected demand, the latter supported by the price indicator dropping. This placed the near-exuberance reflected in the expected business conditions in question.
“The December PMI numbers are quite disconcerting, and by all indications mostly reflect the electricity constraint. Urgent and effective interventions are needed from all players. If not, stronger production patterns in the metals and engineering sector will not materialise during 2015,” Mr Langenhoven concluded.