Investec PMI increases with pick-up in business activity

The seasonally adjusted Investec Purchasing Managers Index (PMI) increased by 2.4 index points to reach 57.2 in January, driven almost exclusively by a pick-up in business activity and hence production, said Vivienne Taberer, portfolio manager at Investec Asset Management.

The seasonally adjusted business activity index accelerated significantly by 7.5 index points to 62.7 in January. "Factors that may have spurred the increase in output include the need to replenish inventories, intensified backlogs of sales orders, as well as the slight depreciation in the Rand exchange rate. This impacts positively on manufacturers' expectations with respect to business conditions, even in the short term, as imports become less competitive," Taberer said.

As a result, purchasing managers upped their expectations regarding the buoyancy of business conditions within the manufacturing sector in six months time, with this index rising from 65.1 to 67.9.

Growth in new sales orders accelerated marginally, with the seasonally adjusted new sales orders index increasing by 0.7 points to reach 56.9. However, purchasing managers increased their purchasing commitments significantly, with the index increasing to 62.1 from 55.6. "This, together with the more bullish expectations regarding business conditions, bode well for future PMI readings," Taberer added.

"On the downside, employment creation grew at a more moderate pace in January, with the seasonally adjusted employment index declining from 53.2 to 51.2. However, this index remains above the critical level of 50," she said.
 
The PMI price index rose from 73.4 to 76.8. "This index again revealed pressure on input prices, possibly due to continued pressure from agricultural inputs as well as the effect of the slight currency depreciation. It may imply a slightly higher January PPI figure," Taberer said.

"Overall," however, "the survey reveals a positive underlying trend in the manufacturing sector," she concluded.