South Africa’s purchasing managers’ index (PMI) climbed to its highest level in a year and a half in October, pointing to a manufacturing sector edging towards growth.
Sponsor Kagiso Securities said on Monday the key indicator of factory activity rose to 47,6 last month, up from a downwardly revised 45,9 in September, edging closer to the 50 breakeven mark.
Kagiso said while the manufacturing sector continued to lag international developments, a sustained improvement in global prospects should see the key employer returning to growth, aided by the rand giving back some of its big 2009 gains over the past two weeks.
”If the rand sustains the slight weakening bias seen of late, it could also assist the speed of recovery in South African manufacturing production volumes,” Andre Coetzee, head of fixed income at Kagiso, said.
The business activity index extended gains from September to its highest level since April last year, while the new sales orders index also climbed to just below the 50 divide between contraction and growth.
The improvement could help pull Africa’s biggest economy out of recession, with manufacturing one of the sectors hardest hit by the global downturn.
”While global demand in all likelihood has already returned to the system, domestic demand should also improve during the fourth quarter of 2009 with both the (central bank) and National Treasury forecasting an end to the South African recession during the final quarter of the year,” Coetzee said.
The September PMI was revised downwards from 48 as part of an annual recalculation. Without the adjustment the PMI would have increased to 48,9, Kagiso said. — Reuters