South Africa: February PMI points to first expansion in seven months
March 5, 2018
The Standard Bank Purchasing Managers’ Index (PMI) rose from 49.0 points in January to 51.4 points in February. February’s print pointed to the first expansion in the South African private sector since July 2017, and marked the best reading since December 2016. The indicator furthermore came in above the six-year long-run survey average of 50.7 points.
February’s upturn was driven by increased output and expanding new orders. Growth in new orders was boosted by domestic demand and suggests that political uncertainty and tensions are receding following embattled President Zuma’s resignation on 14 February. To keep up with the higher demand, firms increased staffing levels for the second consecutive month, contributing to a decline in backlogs of work as operative capacities increased. Regarding price developments, input costs rose sharply, driven by higher staffing and raw material costs. Output prices increased as well as firms passed on higher prices to clients.
Commenting on February’s figure, Economist Thanda Sithole at Standard Bank said:
“The February outcome supports our view that the improved political backdrop, including intervention in SA’s State Owned Entities (SOEs) to restore corporate governance, as well as the cabinet renewal under President Ramaphosa, should lift sentiment and thereby stimulate the PMI to improve further. However, whether the perceived optimism is sustained will largely depend on the approach taken to address policy issues such as land expropriation without compensation and radical economic transformation.”
South Africa Investment Forecast
FocusEconomics Consensus Forecast panelists see investment expanding 0.9% in 2018, which is unchanged from last month’s estimate. For 2019, the panel expects investment to increase 2.1%.