André Roux: Head of fixed income, Investec Asset Management

MONEYWEB, Byron Kennedy, 01 November 2004

The Investec PMI / Purchasing Managers Index has fallen to its lowest level in five months on a seasonally adjusted basis.

MONEYWEB: We’re joined now by André Roux, the head of fixed income at Investec Asset Management. You’ve described the decline as disappointing, the drop to 56 points. What had you expected this time around?

ANDRÉ ROUX: Well, I would have expected the index to remain more or less at its earlier levels, so I think it is a big surprise that it’s come down quite substantially. But at the same time, if you look back at the history of the index, it’s a monthly data series. All monthly data series are to some extent unstable, and this one declined for example in the middle of 2000, when it was at similarly very high levels. It came down for two, three months and then bounced back quite sharply, so maybe it’s a data instability. At the same time it is concerning and could be the beginning of a softening trend that suggests that maybe the growth in manufacturing has been decelerating and the official figures will reveal that over the next month or two – but perhaps we’re also beginning to see a softening in the growth momentum.

MONEYWEB: What is your reading of the situation? Could we expect further declines over the next few months?

ANDRÉ ROUX: I wouldn’t expect it to decline further, but it may stabilise at these levels. Globally, in many other countries a similar index is done, released on the same day, the first working day of each month, and those were all around the 60s and above 60s level for quite a while. And then finally South Africa’s index caught up. Most of the US and European indices have been in mid-50 territory for some time now and maybe we are catching up and feeling the slowdown in growth momentum. There’s still positive growth and it’s important to stress that, but maybe we’re also feeling the slowdown in growth momentum that has characterised global industrial growth for the last four or five months.

MONEYWEB: How far would it need to fall, this PMI index, before it does become a major concern?

ANDRÉ ROUX: Well we would like to see the momentum as strong as possible of course, but so long as it’s above 50 it does mean that there’s growth in this sector – and this is in the mid-50s range and that’s consistent with fairly strong year-on-year growth still, of the order of 4 to 5%. So it’s not by any means a crisis situation, but I think it’s a little bit disappointing in the sense that the readings before the current one suggested that we would end up growing by 7, 8, 9% year on year in the sector.

MONEYWEB: So it’s really too early yet to officially label it a general slowdown. That was André Roux, head of fixed income at Investec Asset Management. Very briefly, Arthur, is it an index that you watch at all as a trader?

ARTHUR BUCHNER: I think sometimes you get information overload. Besides the main CPIs and PPIs, it’s not something that a trader would watch – long-term fundamentals maybe.

MONEYWEB: So this is more for your investor types, long-term, not our short-term speculators like Arthur Buchner from Nedcor Securities.

Posted in Market commentary

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