Manufacturing index begins 2017 on ‘solid footing’
The seasonally adjusted Barclays Purchasing Managers Index (PMI) rose to 50.9 in January, up from 46.7 in December.
“This was the first time since July 2016 that the index edged above the neutral 50-point mark, suggesting that the manufacturing sector started the year on a relatively solid footing,” the Bureau for Economic Research (BER), which compiles the PMI on behalf of Barclays, said earlier this month.
The BER noted that manufacturers targeting the export market might expect to benefit from an uptick in global demand, as reflected by the sustained high levels of PMI readings in the US, Europe and, to a lesser extent, China.
The rise in the headline PMI was supported by month-on-month improvements in four of the five underlying subcomponents.
The sustained uptick in orders filtered through to higher output levels, as a result of which the business activity index rose to 52.7 – its best level since June 2016.
The employment index also improved; however, the latter remained below the neutral 50-point mark for a fifth month.
The index measuring suppliers’ performance recovered to 53 points in January from a historic low of 40.9 in December.
The index measuring expected business conditions in six months’ time surged to 70.3 from 53.2 points in December.
BNP Paribas Securities South Africa economist Jeffrey Schultz commented that, going forward, domestic demand could be supported by an expected improvement in the agriculture sector.
“However, this could be countered by a slowdown in consumer spending,” he warned.
Schultz pointed out that a move back into expansionary territory for four of the five subcomponents of the PMI index was encouraging and pointed to a better start to the year for domestic manufacturers.
He noted that the industry looked poised for slightly better growth prospects, compared with the first quarter of 2016, when the PMI stood at 43.8.
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