CAPE TOWN - The Absa Purchasing Managers’ Index (PMI) rose to 50.9 points in April from 46.9 points in the previous month on the back of a surge in new sales orders.

The PMI inched up 4 index points, suggesting that business conditions in the domestic manufacturing sector improved last month. The reading was the highest since March 2017.

The PMI showed that new sales orders recovered strongly by 12 index points to 56.5 points, following a surprise decline in the preceding month.

Investec economist Lara Hodes said strengthening demand was reflected in the substantially higher new sales orders for April.

“Recent positive events, including a 25 basis point rate cut, coupled with a sharp increase in consumer sentiment, should lift private consumption going forward,” Hodes said.

“Additionally the global composite PMI, although slightly weaker than February’s 41-month high, is still elevated on a quarterly basis and should continue to lend some support to the domestic economy.”

In March the new sales orders index declined.

Purchasing index

The purchasing commitments index rose to 48 points in April from 44.8 points in the previous month while the purchasing price index increased by 6.2 points to 66.9 points in April.

This reflected an acceleration in cost increases for manufacturers on the back of a weaker rand exchange rate as well as a higher Brent crude oil price compared to the previous month.

The inventories remained in construction territory rising to 46.4 points in April, while the employment index ticked up towards the expansion territory at 49.5 points in April from 49.3 points in the prior month.

Africa economist at Capital Economics John Ashbourne said April’s reading points to growing confidence in the economy.

“We would caution against reading too much into today's figure. The manufacturing PMI has been volatile in recent months,” Ashbourne said.

The World Bank, in its South Africa economic update last month, said the country’s manufacturing sector remained uncompetitive.

The Washington-based lender said the recovery of the sector would depend on policies that support competition and competitiveness.