Business conditions continue to improve - PMI

(iStock)
(iStock)

Cape Town – South Africa’s Purchasing Manager’s Index (PMI) climbed to a 19-month, rising from October’s 50.5 to 50.8 in November. 

“The November data signalled a continuation of the economic upturn in South Africa that started in September,” Standard Bank said in a statement. 

The PMI is a composite index, which is calculated as a weighted average of five individual sub-components: 

- new orders (30%)
- output (25%)
- employment (20%)
- suppliers’ delivery times (15%) and 
- stocks of purchases (10%). 

A PMI number of above 50.0 signals an improvement in business conditions on the previous months, while one below 50.0 shows deterioration in conditions. 

Kuvasha Naidoo, Standard Bank economist, said the fact that PMI was above 50 for a third consecutive month in November was primarily a reflection of stronger domestic conditions as exports fell into contraction. 

“Employment was the driver of the overall faster pace of expansion in November as companies increased their workforces at an accelerated rate.” 

She noted that the three-month average of the leading PMI indicator has also been above one for the past three months, which was a signal of a possible trend of expansion in the private side of the economy, as both new orders and stocks of purchases in November expanded. 

The November data reflected a slight rebound in new orders placed with private sector firms in South Africa, following a marginal decline in October. 

The increase in new work was driven solely by the domestic market, as new exports fell at the quickest pace in a year. 

Companies raised their output on the back of increasing new business and backlogs, which led to higher employment levels in November. 

Although the expansion in activity was only slight, the rate of job creation reached a 19-month high, Standard Bank said. 

“Purchasing activity also increased during the month which in turn led to a build-up of inventories. Rates of expansion were modest in both cases.” 

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