Increase in PMI suggests improving manufacturing conditions

01 March 2013

The seasonally adjusted Kagiso Purchasing Managers' Index (PMI) posted a robust increase in February, moving above the key 50 point mark for the first time since August 2012. The index increased by 4.5 points to 53.6, registering its second consecutive increase. A continuation of the upward trend in March will bode well for actual manufacturing production in 2013Q1.

The headline PMI number was driven higher by an improvement in four of the five underlying sub-indices. The

new sales orders index increased by 9.3 points to 60.2. The index has increased by 15.3 points over the past two months, reaching its highest level since February 2012. The business activity index gained 2.6 points to 52.2. Tentative indications of an improvement in the EU and US economies at the start of 2013 may have contributed to the increased demand for manufactured goods. The weaker rand exchange rate since the start of the year may also have improved the short- term price competiveness of local producers on international markets.

The employment sub-index gained 3.4 points to 45.7. While this is the first increase since November last year, the index still remains significantly below its pre-crisis highs. In complete contrast, factory sector input cost pressures continued to mount - the PMI price index registered its seventh consecutive increase to reach 86. This is the highest level since March 2011.

The index measuring expected business conditions in six months remained largely unchanged. The index declined by 1.4 points to 56.8, but was still well above the 50 level. The PMI leading indicator also suggested improved business conditions in future. It rose above 1 (to 1.08) for the first time since March 2012.

Download: pmi_feb_2013.pdf