The February procurement managers’ index (PMI) – indicating the purchasing managers’ acquisition of goods and services - rose to 57.9 pts (the highest in two-years) from 53.2 pts in January.
The index is well above the 50-benchmark level, which bodes well for the manufacturing sector and economic growth prospects, according to the Standard Bank PMI report.
The main contributors to the month’s increase in the index were: the business activity sub-index (which increased by 11.6 pts in February to 65.2 pts from 53.6 pts in January, and an average of 59.4 pts in the first two months of the year); and the new sales orders sub-index (which increased to 64.8 pts in February from 57.3 pts in January, and is indicative of the fact that demand for SA factory goods has picked up pace).
There is still concern, however, about the employment sub-index, Standard Bank added, which is finding it rather challenging to break through the benchmark level to the topside. The employment sub-index held below 50 for the twelfth consecutive month, suggesting that manufacturers remain hesitant to increase employment in the face of sluggish global and domestic demand. The index, nonetheless, increased to 48.6 pts in February from 45.2 pts in January.
A fairly upbeat outlook is painted by the sentiment indicators. The expected business conditions index, which gauges manufacturers’ forward-looking sentiment, increased to 66.2 pts in February from 65.1 pts in January. The index has been rising consistently since July 2011, despite increasing concerns regarding global and domestic economic conditions.
Still, downside risks to the sector in 2012 cannot be ruled out, said Standard. There is increasing concern that the fundamental support from the main manufacturing sectors - such as the basic iron and steel, petroleum and chemicals sectors and, to a degree, the automotive sector - may see sluggish growth and pressure manufacturing production lower.
