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Cape Town - Private sector health saw an improvement in February as business conditions caused an uptick in the purchasing managers' index, the latest PMI data from Standard Bank showed on Monday.
Higher volumes of new orders formed the basis for growth, as firms saw the level of new business rise for the first time in seven months. Supported by expansions in purchasing activity and workforce numbers, business activity rose for the first time in 11 months.
The PMI rose to 51.4 in February from 49.0 at the start of 2018, signalling an improvement in private sector health for the first time since the start of 2018.
The headline PMI is a composite single-figure indicator of changes in private sector business conditions, any figure greater than 50.0 indicates overall improvement in conditions.
February saw business activity increase at the fastest rate in over a year, data showed.
Political backdrop plays a role
According to survey panellists, the return to growth of output was the result of product diversification and easing political tensions.
Commenting on February's findings, Thanda Sithole, economist at Standard Bank, said the private sector PMI indicated a modest improvement in domestic business conditions. The PMI climbed above the 50-point mark reaching 51.4 from 49.0 in January, after remaining in contraction for 6 months running.
"The outcome supports our view that the improved political backdrop, including intervention in SA’s state-owned entities to restore corporate governance, as well as the Cabinet renewal under President '[Cyril] Ramaphosa, should lift sentiment and thereby stimulate the PMI to improve further."
"However, whether the perceived optimism is sustained will largely depend on the approach taken to address policy issues such as land expropriation without compensation and radical economic transformation," said Sithole.
Business activity
Firms won more new business mid-quarter amid stronger underlying demand as domestic demand drove growth, international sales contracted again in February.
A rise in purchasing activity supported the increase in business activity. Buying levels expanded for the first time in seven months.
Employment increased for the second month in succession. Overall input prices continued to increase in February, with data suggesting that purchase prices and staff costs were driving factors behind the rise.
That said, cost burdens rose to a lesser extent compared to January. Despite softer input price inflation, the rate of increase in average selling prices picked up mid-quarter, data showed.
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