Factories perk up in December


Factories perk up in December

Published Date: 2019-01-10 | Source: Stephen Gunnion | Author: Stephen Gunnion

Factories perk up in December

Absa's PMI rose above the 50 breakeven lever for the first time in 10 months as production and new sales orders improved.

The manufacturing sector may be in for a better year after sentiment picked up in the final month of 2018.

The Absa Purchasing Managers' Index (PMI) rose to 50.7 points in December from November's 49.5, moving into expansionary territory for the first time since last February. And for the first time since July, respondents also expect business conditions to improve in 6 months' time.

The index, which gauges manufacturing activity, is compiled by the Bureau for Economic Research (BER) at Stellenbosch University and is based on the widely-used PMI produced by the Institute for Supply Management in the US. It's calculated using the weighted average of a number of indices including Production, New Orders, Employment, Supplier Deliveries, and Inventories.

The improvement reflected stronger contributions from the production and new sales orders sub-indices, the BER said. Strengthening demand was attributed mainly to export sales. Sentiment was likely supported by the further slowdown in operating cost inflation, linked to December's petrol-price cut. However, the employment sub-index fell back to 40.5 from 43.5, suggesting staffing levels were reduced.

In a separate note, Investec tempered expectations of further gains after the global PMI dipped to its lowest level in over two years in December. It said increased uncertainty regarding the goal economic outlook is partially linked to international trade tensions.

Locally, the BER said a possible return of electricity load shedding from mid-January could depress the tentative signs of a recovery in the sector.

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