South Africa’s purchasing managers index (PMI) rebounded sharply to 56,1 in October, as robust demand pushed new sales orders up, sponsor Investec said on Thursday.
The index, which measures underlying manufacturing activity, leapt from a near two-year low of 51,6 in September and snapped a two-month decline.
The five-point jump comes despite a further hike in interest rates in early October, pointing to an economy that appears to be largely shrugging off tighter monetary policy.
”Although all the sub-indices contributed to the rise in the overall Investec PMI, the resurgence is somewhat puzzling [given higher interest rates],” said Andre Roux, head of fixed income at Investec Asset Management.
The central bank has raised its repo rate by 350 basis points in total since June last year to tame growing inflationary pressures and robust consumer spending.
The PMI increase follows a recovery in retail sales and manufacturing output in August, but bucks the trend of a slump in new vehicle sales and a slight slowdown in credit growth.
”I was surprised by the number … but I think we should wait and see next month’s data to see if it is a trend. It seems too erratic,” Roux told Reuters.
”The number really goes against the global trend and is also surprising considering the interest rates,” he said.
Investec said accelerated new sales orders were the main contributor to the higher PMI, suggesting that demand in the economy remained robust and manufacturers were benefiting.
The new sales orders index jumped to 60,3 in October, from 52,7 in September while business activity rose 5,2 points to 54,2 and the inventories index to 60,9 from 55,6.
Roux said the latest reading could be a correction after the slump witnessed in the sector due to strike action.
”However, given the further strengthening of the rand … as well as the cumulative effect of interest rate hikes, we probably need to brace ourselves for the next reading,” he said.
Official data last month showed manufacturing output growth quickened to 5,1% year-on-year in August from 3,2% in July.
The central bank has signalled that it would not hesitate to raise interest rates to bring inflation back to its 3% to 6% target range as demand put pressure on prices. – Reuters