Following a very poor start to the year, the Absa Purchasing Managers’ Index (PMI) improved in February. The headline PMI rose from 43.6 to 51.7 points. While this is a welcome increase, it does need to be qualified by saying that business activity remains more subdued. Indeed, of the five subcomponents of the PMI only suppliers’ performance is above 50 – although, encouragingly, new sales orders are almost there. It is also useful to highlight that the survey tracks month-on-month movements, so with the January PMI being so weak, a slight uptick in February would have resulted in a considerable increase in the indices. Business conditions can still be more challenging than the long-term average experience.
Despite remaining in negative terrain for a second month, the business activity index recorded a solid increase to reach 48.6 in February. 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.
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.
The third consecutive uptick in purchasing prices is noteworthy. At 72.2, the index is now 10 points above the Q4-average. 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.
