South African manufacturing expansion increased in March as sales orders remained high but optimism was waning, pointing to a possible slowdown ahead, the Purchasing Managers Index (PMI) showed on Monday.
The PMI index rose to 60,5 on a seasonally adjusted basis after increasing to 60,3 in February, Investec, which sponsors the index, said in a statement.
”Although the results broadly resemble those of February and depict positive current conditions, there is an important difference in that the forward-looking indicators are not as optimistic as before,” Andre Roux, head of fixed income at Investec Asset Management.
Growth in new sales orders remained high, but did not accelerate further, after having increased 7,4 index points in February.
Investec said the seasonally adjusted inventory index declined to 55,6 from 61,2, which signals expectations of a slowdown ahead, since it was backed by a decline in both purchasing commitments and expected business conditions indices.
Purchasing managers had adjusted their expectations regarding future business conditions downwards, with this index declining to 66 from 71,5 in February.
Price pressures flared up once again after having receded in February, while suppliers’ performance deteriorated and the backlogs of sales orders increased slightly.
The PMI price index increased to 76,2 from 73,8 in February.
”March saw renewed pressure on the international oil price given geopolitical tensions as well as high international maize prices,” Roux said.
”In the wake of below average harvests, domestic agricultural prices were driven higher. Further, the rand traded at depreciated levels most of the month,” he added.
The rand lost about 4% of its value versus the dollar due to the global sell-off from late February, reaching a four-month low of 7,54/dollar.
Rising oil and food prices are widely expected to reignite inflation over the next few months after the targeted CPIX (Consumer Price Index excluding interest rates on mortgage bonds) inflation index eased to 4,9% year-on-year in February, putting the central bank’s 3% to 6% percent target range at risk.
The PMI employment index continued to increase to reach a new historical high of 58,7 index points.
Manufacturing is seen as one of the most crucial sectors to help create jobs and slash stubbornly high unemployment, officially estimated at 25,5%. — Reuters