An empirical analysis of the relationship between the Purchasing Managers' Index (PMI) and share prices in the manufacturing sector of South Africa
This research report investigates the relationship between the Purchasing Managers’ Index (PMI) and share prices in the manufacturing sector of the Johannesburg Stock Exchange of South Africa (JSE). Sub-sector and company performance effects are also considered in evaluating the relationship. The study contributes to existing literature by assessing the relevance of the PMI as a forward looking indicator in South Africa. The Granger Causality test is used with monthly data for the South African PMI and index prices in the manufacturing industry from 2000 to 2013. The results indicate that the PMI does not have the ability to forecast future trends in the manufacturing sector or in any of the sub-sectors. The PMI also had no predictive relationship with the top twenty-five industrial companies. Interestingly, the results revealed a causal relationship where the manufacturing sector prices aided in predicting future PMI figures. Sub sectors such as transportation and engineering provided the same result. Results for the metals and mining sector and the top twenty-five industrial companies revealed no causal relationship between prices and PMI. The findings confirms those of Collins (2001).
Thesis (M. Com. (Accountancy))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Accountancy, 2014.