The rand exchange rate weakened in February, especially towards the end of the month when the PMI survey took place. The rand pushes up the costs of imported inputs and materials. Photo: Bloomberg
THE Absa Purchasing Managers’ Index (PMI) improved in February into expansionary territory, following a very poor start to the year, rising from 43.6 to 51.7 points – better than expected.
While the index showed resilience in February, it did need to be qualified – business activity remained more subdued, Absa said.
Both the business activity and new sales orders’ indices improved considerably, after dipping markedly in January. They remained in contractionary territory (below 50), with the business activity sub-index at 48.6 (previously 37.1) and the new sales orders sub-index at 49.9 (previously 37.2).
Only the suppliers’ performance rose above 50 points.
“New sales orders performed even better, with the index rising to 49.9. Respondents were more upbeat about exports, possibly signalling some alleviation of the congestion and disruptions at local harbours. The inventories index also improved, which may be due to the same reason – or producers finding alternative ways to receive the required input products,” Absa said.
Continuing a recent trend, the expected business conditions index rose once more. The index tracking expected conditions in six months’ time rose to 59.5, up from 58.7 in January and well above the recent low point of 41 reached in November last year.
Absa said: “The rand exchange rate weakened in February, especially towards the end of the month when the PMI survey took place. The rand pushes up the costs of imported inputs and materials. Should these high(er) purchasing price index readings be sustained, there might be some upside risk to the factory gate inflation outlook.”
Investec economist Lara Hodes said the reading was notably above consensus of 46.5 points of Bloomberg.
She added that the average of the business activity index for the first two months of the first quarter this year was below that of the last year, suggesting that the manufacturing sector may again record “a slight contraction following marginal growth” in the fourth quarter of last year, according to the Bureau for Economic Research.
“The new sales orders index was likely buoyed by a lift in export sales, following three consecutive declines.”
This improvement is supported by the results of January’s JP Morgan Global Manufacturing PMI survey results, which reveal that global manufacturing conditions “showed signs of stabilisation at the start of 2024”.
“The year-ahead outlook also brightened, with business confidence rising to its highest level since April last year,” Hodes said.
BUSINESS REPORT
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