The IHS Markit purchasing managers’ index (PMI), released yesterday, rose from 50.3 in March to 53.7 in April as demand begins to recover, indicating the strongest expansion since March 2012. Picture, Reuters.
The IHS Markit purchasing managers’ index (PMI), released yesterday, rose from 50.3 in March to 53.7 in April as demand begins to recover, indicating the strongest expansion since March 2012. Picture, Reuters.

Manufacturing industry soars to nine-year high

By Siphelele Dludla Time of article published May 6, 2021

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THE MANUFACTURING industry in South Africa soared to nine-year high in April as new business and output grew strongly as a result of a sharp rebound from the Covid-19 impact.

The IHS Markit purchasing managers’ index (PMI), released yesterday, rose from 50.3 in March to 53.7 in April as demand begins to recover, indicating the strongest expansion since March 2012.

As a result, IHS Markit said businesses were now much more optimistic about the year-ahead outlook, with the degree of sentiment linked to future activity at its highest since mid-2015.

It said they attributed this to greater hopes that the Covid-19 pandemic will end and that business conditions will improve.

IHS Markit said South Africa enjoyed a strong bounce in economic performance in April as output growth soared to the fastest for just more than nine years.

It said new business also rose at a marked pace, supported by strengthening customer demand as markets recovered further from the Covid-19 pandemic.

Business confidence subsequently jumped to the highest since July 2015, while job numbers started to rise for the first time in a year-and-a-half of the pandemic depression.

IHS Markit economist David Owen said April PMI data signified a sharp acceleration in the economic recovery from Covid-19 across South Africa.

“New business volumes grew at the strongest rate for over nine years, driven by rising business confidence, increased movement and improving export demand,” he said. “In response, firms expanded their output capacity and began to raise staffing levels.”

Owen, however, said input purchases also increased sharply to protect firms against rising input prices in the future as raw material shortages become more widespread.

“Indeed, purchase prices rose at the quickest pace for nearly five years, driving stronger inflationary pressure on selling charges,” he said.

The IHS Markit PMI corresponded with Monday’s Absa PMI reading, which showed that all five subcomponents of the PMI were in positive terrain for the first time since early 2012.

However, Absa’s PMI experienced slowing growth in production in April due to rising costs following three consecutive months of improvement.

On a negative note, IHS Markit said increasing demand for inputs and widespread reports of supply problems contributed to a steep rise in purchasing costs in April.

The rate of inflation was the sharpest for nearly five years in April as output charge inflation accelerated markedly from March.

IHS MArkit said prices paid for purchases by South African firms rose at the sharpest rate for nearly five years, as suppliers marked up their prices for goods in short supply.

“Firms also faced inflationary pressures from staff costs, which rose sharply in line with an increase in hiring activity,” it said.

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