South Africa’s Purchasing Managers Index (PMI) rose for the first time in four months to 57,7 in July on a seasonally adjusted basis, pointing to buoyant business conditions.
Sponsors Investec said on Wednesday the index, which tracks trends in the manufacturing sector, rose from 56 in June as local and international demand lifted sales.
”Accelerated growth in new sales orders and a rise in business activity were the main contributors to the increase, driven by stronger than expected demand in both local and foreign markets,” Andre Roux, head of fixed income at Investec Asset Management, said in a statement.
The new sales orders index rose to 61,3 from 57 points in June, while business activity was up two points to 58,4.
The price component index fell for the first time in six months, indicating that inflation pressures may be easing. But Investec said these levels were still high.
”Readings remain above the 80 point level … high raw material prices coupled with high capacity utilisation rates are futher contributory factors to current pressures,” Roux said.
The manufacturing industry is South Africa’s second largest economic sector, contributing nearly 17% to gross domestic product. It is critical for creating jobs in an economy in which more than a quarter of the population is unskilled and unemployed.
The employment index fell by 1,6 to 53,4 points, but was still above the critical 50 point mark that separates expansion from contraction, Investec said.
The industry has been hit by a firmer rand currency this year, and growth slowed to an annualised 4,7% in the first quarter of 2007 from 8,3% in the fourth quarter of 2006.
Investec said conditions in the sector are likely to improve in the next few months. Inventories saw a strong recovery to 60,8 points after falling to 54,4% in June.
”This is consistent with global readings, which have seen significant improvements after substantial de-stocking towards the start of the year,” Roux said.
”In all, the results portray continued positive conditions within the manufacturing sector and we expect these to prevail over the near term.” – Reuters