Factories show renewed optimism
SOUTH Africa has had its first expansion in factory activity since May as firms expected an improvement in manufacturing due to improved economic outlook.
The Absa Purchasing Managers Index (PMI) rose to 50.8 in February from 49.9 in January, indicating renewed optimism in the manufacturing sector.
The index, released yesterday, showed that sentiment had breached the key 50 mark that divides expansion from contraction. It said the most positive outcome was that business conditions would improve in the next six months.
The index rose to its highest level since 2001, having surged to 79.1 points after solid increases in December and January. The index is now almost 30 points above November’s level. However, the employment indicator remained subdued despite the apparent recovery in output.
The PMI also showed that South Africa fared better in the month than its rival, Nigeria.
The Nigerian PMI figures, released on Wednesday evening, suggested that conditions there weakened a touch in February.
The manufacturing index slipped from 57.3 in January to 56.3 in February, while the non-manufacturing index fell from 58.5 to 56.1.
John Ashbourne, an Africa economist at Capital Economics, said the survey suggested recovery would strengthen in 2018.
“Output data released last week showed that the manufacturing sector strengthened in the last quarter of 2017. We think that gross domestic product (GDP) data due on March 6 will show that economic growth remained at about 2 quarteron-quarter in the fourth quarter,” Ashbourne said.
Statistics South Africa said last month that manufacturing production had increased 2 percent year on year in December, in line with expectations.
Food and beverages, petroleum, basic iron and steel, and motor vehicle and parts manufacturing were the main drivers of growth.
The PMI also painted a rosy picture that export growth should recover in the months ahead, broadly in line with foreign demand amid an increasingly broad-based and synchronised lift in global economic growth.
It showed that the new sales orders index had increased for the second month, reaching 52.7 points in February. This was the first time since the first quarter of 2017 that the index had managed to stay above 50 for two straight months.
Lisette IJssel de Schepper, an economist at the Bureau for Economic Research (BER), said the fact that new sales orders had outstripped inventory levels was another positive sign.