ACTIVITY in manufacturing rose in February, signalling the first improvement after a few months of deterioration. The data, however, also show that activity remains weak.
The seasonally adjusted Barclays purchasing managers index (PMI) recovered to a four-month high of 47.1 points in February from 43.5 in January. The 47.1 points is above the 45.6 average recorded in the fourth quarter of last year.
Although a level below 50 still shows contraction in manufacturing activity, the improvement in the PMI shows that activity is picking up.
"Despite the modest improvements, the data still clearly show a sector under significant strain with the exchange rate depreciation seemingly offering very little competitive support," Barclays Africa economists said.
The slight improvements in the PMI would need to be sustained before the sector posted meaningful growth, Barclays economists said. Only if demand picked up on a sustained basis would production and subsequently employment be pulled higher as well, they added.
The improvement in the PMI was driven by increases in business activity, new sales orders, inventories and purchasing commitments. The index indicating employment fell.
New sales orders rose at a faster pace than inventories, suggesting that production could pick up in coming months.
Producers are dealing with mounting cost pressures, evident in a sharp rise in the price index to 90.7 in February from 86. The weak rand has pushed up the cost of imported raw materials and intermediary products.
"The risk is that firms could have to pass these costs onto their customers, and we see this as an upside risk to the near-term consumer price inflation outlook," the economists said.
Manufacturers remained downbeat in their assessment of conditions in six months’ time with the expectations index at a fairly weak 44.8.
BLOOMBERG/MARTIN LEISSL
ACTIVITY in manufacturing rose in February, signalling the first improvement after a few months of deterioration. The data, however, also show that activity remains weak.
The seasonally adjusted Barclays purchasing managers index (PMI) recovered to a four-month high of 47.1 points in February from 43.5 in January. The 47.1 points is above the 45.6 average recorded in the fourth quarter of last year.
Although a level below 50 still shows contraction in manufacturing activity, the improvement in the PMI shows that activity is picking up.
"Despite the modest improvements, the data still clearly show a sector under significant strain with the exchange rate depreciation seemingly offering very little competitive support," Barclays Africa economists said.
The slight improvements in the PMI would need to be sustained before the sector posted meaningful growth, Barclays economists said. Only if demand picked up on a sustained basis would production and subsequently employment be pulled higher as well, they added.
The improvement in the PMI was driven by increases in business activity, new sales orders, inventories and purchasing commitments. The index indicating employment fell.
New sales orders rose at a faster pace than inventories, suggesting that production could pick up in coming months.
Producers are dealing with mounting cost pressures, evident in a sharp rise in the price index to 90.7 in February from 86. The weak rand has pushed up the cost of imported raw materials and intermediary products.
"The risk is that firms could have to pass these costs onto their customers, and we see this as an upside risk to the near-term consumer price inflation outlook," the economists said.
Manufacturers remained downbeat in their assessment of conditions in six months’ time with the expectations index at a fairly weak 44.8.
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