For the first time in 11 months, business activity expanded in the South African private sector in February, with the Standard Bank Purchasing Managers Index (PMI) increasing from 49 in January to above the crucial 50-point mark, at 51.4 points.

This was after being in contraction for six months. This, Standard Bank’s PMI report highlighted, was driven by product diversification, coupled with an increase in new projects.

Standard Bank economist Thanda Sithole said these findings supported the bank’s view that the improved political backdrop, including the intervention in State-owned entities to restore corporate governance, as well as the Cabinet renewal under President Cyril Ramaphosa, would lift sentiment and stimulate the PMI to improve further.

“However, whether the perceived optimism is sustained will largely depend on the approach taken to address policy issues such as land expropriation without compensation and radical economic transformation,” Sithole warned.

The increase in the February PMI was across all subindices, with output, new orders and inventories rising above 50 to 51.3, 51.6 and 51.2 respectively. Employment increased slightly to 50.8 from 50.7.

Supporting the increase in business activity was a rise in purchasing activity. In fact, buying levels rose for the first time in seven months in February.

Further, employment increased for the second month in succession.

Greater operative capacity also enabled private-sector businesses to reduce their work in hand in February, after outstanding business began to accumulate in January.

Meanwhile, supplier delivery times continued to lengthen as rising demand, product shortages and delays at ports caused a deterioration in vendor performance.

Elsewhere, overall input prices continued to increase in February, with data suggesting that purchase prices and staff costs were driving factors behind the rise.

“That said, cost burdens rose to a lesser extent, compared with January. Despite softer input price inflation, the rate of increase in average selling prices picked up midquarter. Panel members generally linked higher output prices to input costs, as well as unfavourable exchange rates,” the report stated.