pmi update image

28 Feb 2018

PMI update: The Manufacturing PMI climbed above 50 in February 2018, for the first time since May 2017

Annabel Bishop

Chief Economist

Figure 1: Manufacturing growth vs Absa PMI*
  • Based on the latest PMI survey, manufacturing sector conditions improved in February 2018. Specifically, the PMI gauge climbed into expansionary territory (above 50) from 49.9 in January to 50.8 in February. This marks the highest level since March 2017 (see figure 1).
  • The PMI averages 50.4 so far for Q1.18.
  • Advances in the business activity index and new sales orders index, which combined constitutes over half the PMI’s weighting, were primarily responsible for the upturn in the headline outcome. These indices logged increases of 2.1 points and 2.3 points respectively in February, when compared to January.
  • Furthermore the new sales orders index came in higher than the inventories index, which translates into a PMI leading indicator greater than 1. “This usually bodes well for output growth going forward”, according to the BER.
  • The expected business conditions index, which looks at business conditions expected in the next six months logged another sharp rise for the second month in a row, lifting by 6.3 index points in February.
  • The purchasing price index dipped even further in February, primarily on the back of the stronger rand, easing cost pressures for manufacturers and the lower oil price (see figure 3). This index dropped to 59.6 points down over 15 points since December 2017.
  • Based on the results of this survey, as well as improved sentiment, following Cyril Ramaphosa’s instatement as president of the republic and a marked rise in global manufacturing activity as seen by the global PMI climbing to a seven year high in December 2017, we should see an uptick in manufacturing activity going forward (see figure 4).
Figure 2: Absa Purchasing Managers Index: results
Figure 3: Nominal trade weighted rand
Figure 4: SA versus global manufacturing PMI