SA manufacturers decouple from world in February

The SA PMI surged from 49.4 in December 2011 to 53.2 in January 2012 and 57.9 in February, while the global PMI eased to 51.1 in February from 51.3 in January and 50.5 in December.

JP Morgan noted that the highest PMI output indices in February were posted by Denmark, SA, India and the US. Among the larger manufacturing nations, growth was registered in China, Japan, Germany and the UK.

"The global PMI rose to a seven-month high at the start of 2012. The PMI shows that order growth has picked up while inventory growth has slowed - a positive combination," says David Hensley, JP Morgan's director of global economics coordination.

Although most economists are downgrading their 2012 SA gross domestic product (GDP) forecasts, the two-month resurgence in the SA PMI could mean a revising of forecasts upwards in coming months as production finally catches up with strong consumer demand.

In the first nine months of 2011, the South African Reserve Bank (SARB) reported that household consumption expenditure grew by 5.2% year on year (y/y) compared with a 3.7% increase for all of 2010. The SARB will report on the full year 2011 consumer demand on 19 March.

Statistics SA reported on 28 February that the real value added by manufacturing grew by a seasonally adjusted annualised quarter on quarter rate of 4.2% in the fourth quarter after a 0.7% contraction in the third quarter. Manufacturers will be hoping that they can match the 12.8% increase of the first quarter 2011 in the first quarter 2012. The February PMI output sub-index jumped to 65.2, a five-and-a-half-year high, from 53.6 in January and 49.7 in December.

The PMI leading indicator (new sales orders expressed as a ratio of inventories) rose to 1.26 in February from 1.07 in January and less than 1 in December, suggesting that the level of inventories is currently low relative to the demand for manufactured goods so that manufacturing activity will remain robust going forward.

The uncertainty about the eurozone meant that the SA Treasury cut its GDP growth for this year to 2.7% from the 3.4% projected in October 2011 and the 4.1% forecast given in February 2011.

Growth in 2013 is projected at 3.6% from 4.1% in October and 4.4% in February 2011. Growth goes back above 4% in 2014 at 4.2%, but this is still lower than the October 2011 forecast of 4.3% and the February 2011 projection of 4.4%.

"The South African economy has demonstrated resilience in this environment. While global developments are likely to hold back higher growth over the short term, the domestic outlook remains positive. Gross domestic product (GDP) growth is expected to slow from 3.1% in 2011 to 2.7% in 2012. As the world economy strengthens, GDP growth will accelerate to 3.6% in 2013 and 4.2% in 2014, led by robust household consumption, and stronger public- and private-sector investment. Government will focus on capital investment in infrastructure projects and reducing the cost of doing business through targeted interventions, including lowering port charges and broadband costs," the Treasury said in the Budget Review.