Kagiso PMI Spikes to Two-Year High, highest since Feb 2010

The Kagiso PMI spiked 4.7 points in Feb to 57.9 points, the highest level in two years.

But get this, Keynesian forecasters were expecting a decline of the PMI to 52.3! These guys don’t have a clue about the developing upswing!

The seasonally adjusted business activity and new sales orders indices drove the robust increase in February. New sales orders and expected business conditions increased further, pointing to a supportive environment for business in the next few months, reports Fin24.com.

As I have been arguing for months now, the South African economy remains in a business cycle upswing phase. Despite all indications pointing to a continued recovery, consensus among economists is still bearish.

“Despite the improvement in the Eurozone sub-component of the global index, we believe that the biggest threat to the manufacturing sector is the contagion risk from Europe, and a recession in that region,” said Standard Bank economist Shireen Darmalingam to BusinessLive.

“The downside risks to SA’s second-largest sector, coupled with weak domestic demand, could weigh on SA’s growth. We anticipate GDP growth to ease to 2.8% this year,” Darmalingam added.

Firstly, weak domestic demand? Darmalingam has clearly not seen the surging retail sales figures, accelerating government spending and also private household credit growth. Secondly, the ECB’s combined EUR1 trillion money injection in the past three months into the Eurozone banking system should prevent any major fallout in Europe.

Continue to expect SA growth momentum to pick up in coming months. Interest rate expectations will also be dragged higher with it.