Business conditions in SA remain buoyant

Cape Town - South Africa’s purchasing manager’s index (PMI) fell from December’s 21-month high of 51.6 to 50.5, showing only marginal growth in business activities. 

On the positive side though, the PMI remained above 50.0 for the sixth month running in February – the longest sequence of growth in nearly five years, Standard Bank said in a statement, signalling an ongoing improvement in the private sector’s operating conditions. 

The PMI is a composite index, which is calculated as a weighted average of five individual sub-components: 

- new orders (30%);
- output (25%);
- employment (20%);
- suppliers’ delivery times (15%); and and 
- stocks of purchases (10%). 

A PMI number of above 50.0 signals an improvement in business conditions on the previous months, while one below 50.0 shows deterioration in conditions. 

The slight decrease in PMI from the December 2016 high was attributed to new business volumes being weighed down to some extent by a further reduction in new export orders, which was partly linked to the recent strength of the rand.

READ: Only 4 in 10 happy with SA's business conditions 

Although growth of new business slowed during February, firms continued to expand their purchasing activity. Input stocks also increased, albeit at a marginal pace.

Private sector employment rose for the eighth month running in February, the longest period of job creation in nearly four years. The rate of workforce growth was modest, and broadly in line with the long-run survey average.

February data indicated a weakening in cost pressures. Overall input prices rose at a rate that almost matched the survey record-low set in February 2015. 

This reflected a series-record low rate of purchase price inflation linked to the strong rand, and a slower increase in labour costs. With muted cost pressures, firms raised their own prices at the weakest rate in the five-and-a-half-years that the survey has been conducted.