March PMI rises to 13-month high

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PMI March growth.jpgThe seasonally adjusted Kagiso PMI put in a strong performance during March, rising to a 13-month high of 57.2 index points, the Kagiso website reports.

The most positive feature of the March numbers is that after rising to just above the key 50 point level in the first two months of 2011, the seasonally adjusted business activity index increased sharply from 51.6 to 59.7 points. The robust rise indicates that March witnessed a ramp-up of manufacturing production, most probably in reaction to previous (sustained in March) indications of improved demand conditions.

On that note, the new sales orders index gained further ground in March and rose to 62 index points from levels between 59 and 60 recorded for the previous two months.

While factory sector output and demand conditions were on a firm footing, the March PMI data also contained some less optimistic trends. Perhaps most disappointing is the employment index which fell back to below the 50 mark to 46.9, indicating that the manufacturing sector shed jobs in March.

Also concerning is the continued upward trend for input costs indicated by the PMI price index, which showed a third consecutive month of strong increase to 88 index points – the highest level since the inflation spike of 2008.
PMI suggests accelerated factory output growth

  • The seasonally adjusted Kagiso PMI put in a strong performance during March, rising to a 13-month high of 57.2 index points. The March gain lifted the average PMI reading for 2011Q1 to 55.5 compared with 51.5 in the fourth quarter of 2010. The improved Q1 quarterly PMI average should be reflected in an acceleration of quarter-on-quarter growth in actual manufacturing production as measured by Stats SA.
  • The most positive feature of the March PMI numbers is that – after rising to just above the key 50 level in the first two months of 2011 – the seasonally adjusted business activity index increased sharply from 51.6 to 59.7 points. The early part of 2010 was the last time that the activity index reached a level close to 60 index points. The robust rise indicates that March witnessed a ramp-up of actual manufacturing production, most probably in reaction to previous (sustained in March) indications of improved demand conditions. On that note, the new sales orders index gained further ground and rose to 62 index points in March from levels between 59 and 60 recorded for the previous two months.
  • While factory sector output and demand conditions were on a firm footing, the March PMI data also contained some less optimistic trends. Perhaps most disappointing is that the employment index fell back to below the 50 mark to 46.9, indicating that the manufacturing sector shed jobs in March. A worrying development is that the index not only declined compared with the February figure, but also came in some way below the January 2011 number of 47.8.
  • Also concerning is the continued upward trend for input costs indicated by the PMI price index, which showed a third consecutive month of strong increase to 88 index points – the highest level since the domestic inflation spike of 2008. The price index declined to 56.4 during October 2010, resulting in an almost 32 point jump in the index during the past five months. This does not bode well for the trend of actual producer prices as measured by Stats SA.

The mixed bag of results reflected in some of the key PMI indices may explain why purchasing managers scaled down their expectations for future business conditions. The expected business conditions index declined for the second month in a row to reach 58.1 points. The index measured 67.1 index points during January.

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