New business stimulates economy – PMI

2012-03-01 11:01

The Kagiso Purchasing Managers’ Index (PMI) posted a two-year high in February, an indication that South Africa’s economy is expanding, researchers said today.

The index rose by 4.7 points to 57.9 – the highest level since 2010, said Abdul Davids, head of research at Kagiso Asset Management.

“The seasonally adjusted business activity and new sales orders indices drove the robust increase in the PMI,” he said.

These two indices have the biggest weighting in the overall PMI index.

The survey is conducted every month by the Bureau for Economic Research at the University of Stellenbosch with the Chartered Institute of Purchasing and Supply.

Last month, the business activity index made the largest positive contribution with an 11.6 point jump. This was a five-and-a-half year high of 65.2 points.

Davids said none of the 26 countries that measured their economies with the PMI had a business activity reading above 65 points.

“The new sales orders index suggests robust demand for South African factory goods as the index gained 7.5 points to 64.8 index points,” he said.

Davids said there had been a pick-up in manufacturing volumes in steel and petroleum products which could have contributed to the robust showing.

The expected business conditions index posted a further marginal increase to 66.2 points.
The PMI’s leading indicator (new sales orders expressed as a ratio of inventories) rose from 1.07 in January to 1.26 during February.

The February PMI also brought good news on the price front with the PMI price index declining by 5.7 points to 75.7.

“Even on the factory job front the situation seems to be looking up as the employment index reached a 12-month peak, even though it remained below the all-important 50 mark.”

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