Independent Newspapers

Picture: Simphiwe Mbokazi.

Cement sales volumes soared by 22.0% year on year (y/y) in January to 779,003 tons, data released by the Cement and Concrete Institute (CNCI) showed.

The Competition Commission only allows the CNCI to report a national figure, not the regional or product detail. The detail would allow economists to better see how much of the cement sales are going into the new power stations, mines, dams and residential buildings in rural areas, none of which is reported by Statistics SA (Stats SA) when they release the building plan data for larger municipalities.

The real retail sales data released by Stats SA is equally deficient in the geographic detail, because even though we know that real retail sales by retailers in hardware, paint and glass grew 17.6% y/y in November, we do not know what the growth rate was in Amersfoort or Zebedelia.

The January 2012 data is merely the latest in a string of strong y/y increases. The increase in the past five months (September to January) was 10.5% y/y with the November 2011 tonnage sold of 1,141,248 the highest monthly total since 2008.

Although most economists are downgrading their 2012 SA gross domestic product (GDP) forecasts, a resurgent seasonally adjusted Kagiso Purchasing Managers' Index (PMI) in January 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 reported that household consumption expenditure grew by 5.2% y/y compared with a 3.7% increase for all of 2010. Statistics SA said on January 18 that real retail sales grew by 5.7% year on year (y/y) in the first 11 months of 2011 compared with 5.1% for all of 2010, which includes demand from 2010 Soccer World Cup foreign fans. November sales were up 6.8% y/y and anecdotal reports show that there was a bumper Christmas shopping season.

The resurgence in manufacturing is not isolated to SA as the global PMI compiled by JP Morgan rose to 51.2 in January from 50.5 in December.

David Hensley, JP Morgan's Director of Global Economics Coordination, said: “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. The underlying trend in output growth is still soft, although it will be flattered in the very near-term by the post-flood bounce in Thailand and the resulting restoration of global supply chains.”

The latest organisation to lower its SA GDP forecast was Business Unity SA (BUSA) which cut their 2012 GDP growth forecast to 2.7% from 3.0% and that for 2013 to 3.3% from 3.8%.

The PMI, which is a measure of activity in the SA manufacturing sector with 50 the breakeven level, rebounded to 53.2 in January after slipping to 49.4 in December from 51.6 in November. This was well above what economists expected.

Abdul Davids, the Head of Research at Kagiso Asset Management, said “the January reading of 53.2 is substantially above the consensus expectation of 50.2 and also above most developed countries' flash readings for January.”

The SA PMI increase was largely the result of the seasonally adjusted new sales orders index, which jumped to a seven-month peak of 57.3 in January from 48.3 in December and 51.2 in November.

The seasonally adjusted business activity index recovered to 53.6 in January from 49.7 in December and 52.3 in November and only 38.3 in July, when the manufacturing sector was hurt by strike action.

The inventory index declined by 0.7 points to 50.2 and failed to keep pace with new sales orders. As a result, the PMI leading indicator (new sales orders expressed as a ratio of inventories) rose back above 1, which suggests that the level of inventories is currently low relative to the demand for manufactured goods. - I-Net Bridge