Kagiso PMI rises to 54.2 in January

2 Feb 2015

Activity in the manufacturing sector picked up strongly last month as production returned to normal following the festive break when most workers went on leave.

The seasonally adjusted Kagiso purchasing managers index (PMI) - which gauges activity in manufacturing - rose by four index points to 54.2 last month. An above-50 reading on the Kagiso PMI suggests expansion in activity.

CIPS Africa MD Andre Coetzee cautions‚ however‚ that the significant increase in the seasonally adjusted Kagiso PMI may overstate the improvement in actual manufacturing output in January.

The rise in the Kagiso PMI was mainly driven by an increase in business activity. The business activity subindex rose to 61.7 last month from an average of 51.6 in the fourth quarter of last year - pointing towards an acceleration in output during the month.

"Manufacturers likely started the year better than last year. However‚ underlying conditions are unlikely to be as rosy as suggested by the seasonally adjusted figure"‚ Coetzee said.

An increase in new sales orders and inventories also supported the rise in the Kagiso PMI. The new sales orders subindex was up 1.1 index points to 53.7 while the inventories subindex rose to 61.2 from 52.

The sector is unlikely to create many jobs‚ as the employment subindex fell further below 50 to 43.8 last month from 46.3 in December.

Manufacturers continued to reap the benefits of lower oil prices as reflected in a further decline in the price subindex. The price subindex fell to 61.9 - its fourth consecutive decline.

Coetzee said the continued moderation in the rate of input cost increases‚ as well as the expectation that oil prices would remain low for coming months‚ likely underscored why purchasing managers were optimistic about the near future.

The index measuring expected business conditions in six months' time rose to 66.9 last month from 62.7 in December.

Source: BDpro via I-Net Bridge

Source: I-Net Bridge

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