Extra leap year day boost February cement sales

Cement sales volumes rose by 7.4% year on year to 884,700 tons as the leap year added an extra sales day to February 2012.

If adjusted for the number of sales days, then the increase was a more pedestrian 2.3% year on year (y/y), data released by the Cement and Concrete Institute (CNCI) on Thursday showed.

This followed a massive 22.0% y/y surge in January to 779,003 tons, which meant that sales are up an unadjusted 13.7% y/y in the first two months of 2012 and a sales day adjusted 11.0% y/y.

The Competition Commission only allows the CNCI to report a national figure, not the regional or product detail. The detail would allow economists to better see how much of the cement sales are going into the new power stations, mines, dams and residential buildings in rural areas, none of which is reported by Statistics SA (Stats SA) when they release the building plan data for larger municipalities. The real retail sales data released by Stats SA is equally deficient in the geographic detail, because even though we know that real retail sales by retailers in hardware, paint and glass grew by 17.6% y/y in November, we do not know what the growth rate was in Avondale or Zeerust.

The February 2012 data is merely the latest in a string of strong y/y cement sales increases. The increase in the prior five months (September to January) was 10.5% y/y with the November 2011 tonnage sold of 1,141,248 the highest monthly total since 2008.

Although most economists have a lower 2012 SA gross domestic product (GDP) growth forecast than the 2011 GDP growth achievement of 3.1%, a resurgent seasonally adjusted Kagiso Purchasing Managers' Index (PMI) in February could mean a revising of forecasts upwards in coming months as production finally catches up with strong consumer demand.

In the first nine months of 2011, the South African Reserve Bank reported that household consumption expenditure grew by 5.2% y/y compared with a 3.7% increase for all of 2010. Statistics SA said that real retail sales grew by 6.1% in 2011 compared with 5.1% for all of 2010, which includes demand from 2010 Soccer World Cup foreign fans. There was a 4.9% year-on-year (y/y) or 453,000 increase in formal sector job creation in the fourth quarter of 2011 according to Stats SA, which was "the highest y/y growth observed in the formal sector since the end of the recession in 2009".

The SA PMI jumped to 57.9 in February from 53.2 in January and 49.4 in December, where a reading below 50 indicates that the manufacturing sector is contracting. Prior to July, the index was above 50 for eight consecutive months. The output index surged to 65.2 in February and was the highest amongst the 26 countries that make up the global PMI. This compared with 53.6 in January and 49.7 in December and only 38.3 in July. The new orders index soared to 64.8 in February from 57.3 in January and 48.3 in December.

The buoyant conditions in the manufacturing and construction industries was also reflected in the RMB/BER Business Confidence Index (BCI), which jumped by 14 points to a level of 52 in the first quarter of 2012. This is the first time in over a year that a slight majority of respondents are happy with prevailing conditions in the economy. The business mood improved in all five of the sectors surveyed during the quarter.

The confidence of building contractors rose to a three-year high of 31, which probably means that cement sales in 2012 will improve on the 3.3% gain of 2011.