'Door open for more rate cuts'

THE purchasing managers' index rose for a sixth straight month in January, reinforcing the view that manufacturing is on track to recover after last year's recession.

THE purchasing managers' index rose for a sixth straight month in January, reinforcing the view that manufacturing is on track to recover after last year's recession.

The survey's headline index rose to 53,6 points in January from 52,5 in December, above the key 50 mark that divides manufacturing expansion from contraction, for the third month in a row, sponsor Kagiso Securities said yesterday.

Hopes that the economy is getting back on its feet after its first recession since 1992 were bolstered this month by a sharp slowdown in the rate at which factory output, worth about 14percent of GDP, shrank in the year to November.

Four of the PMI index's five sub-components were up in January, with the employment index leading the gains after posting a 3,7 point rise to breach the 50 level for the first time since April 2008, said André Coetzee, head of fixed income at Kagiso.

Though latest official data showed another contraction in retail sales in the year to November, meaning consumer demand remained depressed at the end of 2009, a rise in the PMI's new sales orders signalled a possible improvement in domestic demand in early 2010.

While the economy grew in the third quarter of last year, consumers remain restrained in their spending due to high debt levels and the effects of a million job losses during the downturn.

Analysts say this leaves the door open for more interest rate cuts. - Reuters

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