PMI recovers on back of strong sales

Recovering from a weak December level, the seasonally adjusted Kagiso Purchasing Managers Index (PMI) rose strongly to 53.2 in January.

The index rose 3.8 points to its highest level since June 2011 and above the 2011 average of 52.1.

Although the move higher for the domestic PMI is in line with the January flash estimates of South Africa’s key trading partners such as the Eurozone (from 46.9 to 48.7) and China (48.7 to 48.8), the level of the local index certainly reflects a much better underlying picture. Indeed, at above 53 the SA PMI is closer to the recent movement in the US PMI as measured by the ISM.

The robust South African PMI reading was largely the result of the seasonally adjusted new sales orders index, which surged by 9 index points to a seven-month peak of 57.3 index points.

PMI leading indicator (new sales orders expressed as a ratio of inventories) rose back above 1, suggesting that the level of inventories is currently low relative to the demand for manufactured goods.

The seasonally adjusted business activity index recovered after a poor December, rising by 3.9 index points to 53.6.

However, purchasing managers continued to indicate that input cost pressures were on the rise. “While the PMI price index declined slightly compared with December 2011, it remained above 80 index points for the fourth consecutive month.”

The expected business conditions index rose by 3.8 points to 65.1 and which has increased by just more than 10 index points (from 55 to 65.1) between November 2011 and January 2012.

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