PMI rises to six-year high as weaker rand boosts manufacturing

South Africa’s purchasing managers’ index (PMI) unexpectedly rose to its highest level in six years in August as a weaker rand made manufactured-product exports more attractive, Kagiso Tiso Holdings said.

The seasonally adjusted index climbed to 56.5 from 52.2 in July, Johannesburg-based Kagiso said in an e-mailed statement on Monday. The index has been above 50, an indication of expansion in factory output, for five months.

The median estimate of four economists surveyed by Bloomberg was for the index to drop to 51.5.

"We may be seeing the first signs of import replacement as the weaker rand improves the competitiveness of locally-manufactured goods, versus more expensive imported goods," Kagiso said. "The sustained weakness in the currency has improved the global competitiveness of our exports of manufactured goods."

The rand has dropped 17% against the dollar this year, the worst performer among 16 major currencies tracked by Bloomberg and reached a four-year low of 10.5096 per dollar on August 28. Some exporters are already benefiting from the weaker rand, Finance Minister Pravin Gordhan said in an interview on August 27.

The index measuring business activity rose 7.4 points to 59.2, Kagiso said. The new sales orders index climbed 2.5 points to 57.5, while the purchasing commitments index gained 11.6 points to 54.4, it said.

The Bureau for Economic Research, based at the University of Stellenbosch near Cape Town, conducts the PMI survey on behalf of Kagiso. – Bloomberg

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