South Africa’s PMI Rises as Weak Rand Boosts Demand for Goods

South Africa’s purchasing managers’ index rose in February, showing an expansion in factory output for the first time in six months, as a weaker rand helped boost demand for locally produced goods, Kagiso Tiso Holdings said.

The seasonally adjusted index increased to 53.6 from 49.1 in January, Johannesburg-based Kagiso said in an e-mailed statement today. An index level below 50 indicates a contraction in factory output. The Bureau for Economic Research, based at the University of Stellenbosch near Cape Town, conducts the PMI survey for Kagiso.

“The significant improvement in new sales orders may reflect a turnaround in demand for locally-manufactured goods,” Abdul Davids, the head of research at Kagiso Asset Management, said in the statement. “Tentative indications of an improvement in the EU and U.S. economies at the start of this year may have contributed to the increased demand for manufactured goods and a sustained recovery in demand will require improved gross domestic product growth in these regions.”

Africa’s largest economy grew 2.1 percent, more than expected, in the final quarter of last year as manufacturing and agricultural output expanded. The rand has this year fallen 6.2 percent versus the dollar, making South African goods more competitive in the European Union and other overseas markets. Only the Japanese yen and the British pound were weaker among 16 major currencies tracked by Bloomberg.

The index measuring employment advanced 3.4 points to 45.7, Kagiso said. The business activity index rose 2.6 points to 52.2, while the new sales orders index increased 9.3 points to 60.2, it said. The price sub-index rose to 86.

South Africa’s energy regulator yesterday ruled Eskom Holdings SOC Ltd., the utility that supplies 95 percent of the country’s electricity, is allowed to raise prices by an average 8 percent in each of the next five years, half the annual increase it requested.

“The lower-than-expected tariff increases are welcomed and should assist in improving the sector’s global competitiveness,” Davids said.

To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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