September’s Kagiso Purchasing Manager’s Index (PMI), which jumped to 48 points, had shown signs of life in the domestic manufacturing sector for the first time since September last year, Kagiso Securities head of fixed income André Coetzee said on Thursday.

The seasonally adjusted PMI had made its second-largest increase since the survey was started in September 1999, improving by 8,7 points from August’s 39,3 points.

The PMI, which is a key measure of manufacturing activity, was now nearing the neutral 50-point level, after having remained below this level since May 2008.

“Although we would like to see confirmation in the fourth-quarter PMI data, the latest results seem to confirm the analysis presented in the July PMI report that South Africa’s manufacturing recovery will probably be similar to countries such as the US and UK which, after an initial muted rise in their respective PMIs, experienced accelerated gains during the following months,” added Coetzee.

Both the business activity index, which increased from 38,3 points in August to 49,4 points in September, and the new sales orders index, which increased from 39,5 points in August to 50,7 points in September, had shown that output volumes had not contracted during September, stated Kagiso.

All near-term demand indicators had also showed similar increases, with the inventories index improving from 37 points in August to 47,6 points in September.

The backlog of sales orders index climbed from 27,3 points in August to 34,4 points, while the purchasing commitments index improved to 44,3 points, compared with 36,6 points in August.

“Demand may be returning to the system,” said Coetzee.

Input cost pressures had, meanwhile, also remained “moderate” in September.

Kagiso highlighted that even the employment subindex, which was a lagging indicator, had improved to 42,7 points, compared with 37,5 points the year before.

However, it noted that the index still indicated factory job cuts.

“With the exception of February 2009, purchasing managers’ optimism regarding medium-term business conditions has been rising steadily since November 2008,” Coetzee noted.

The expected business conditions index had improved to 70,3 points, compared with 59,3 points the month before, reaching its highest level since early 2007, he added.