Global Courant
The Absa Purchasing Managers’ Index (PMI) fell by 1.6 index points to 47.6 in June, from 49.2 in May.
Absa said this is the lowest level since mid-2021. “For the first time since 2018, all five sub-components used to calculate the overall PMI were below the 50-point neutral level.”
This points to deteriorating business conditions in the industry, Absa said.
The index provides monthly feedback from company managers and is determined through surveys conducted among purchasing managers working in the country’s manufacturing sector.
Absa takes the feedback from industry heavyweights and processes all the data to create the index, where 50 represents stability, higher values represent increased activity, and lower levels represent reduced activity.
The chart below shows the change in PMI since 2000:
A key drag on the industry is weak demand, Absa said, with the new sales order index falling again as the decline in export sales deepens and domestic demand remains under pressure.
The new sales index fell from 47.5 in May to 45.6 in June.
On a more positive note, the business activity index improved from May, although it remained below the neutral 50-point mark for the fifth consecutive month.
The index rose from 47.7 to 48.9 in June.
Absa said the improvement in business activity over the past month was likely due to significantly less load outages during the day as weak demand conditions “thwart a larger recovery.”
Daytime load shedding was suspended for much of June as cool weather, lower demand and improved generation helped power company Eskom keep blackouts around phase 1.
“For the entire second quarter, the business activity index was slightly lower than the average for the first quarter, but this is solely due to a high value in January.”
“In general, the level of the business activity index suggests that momentum in official second-quarter manufacturing data remained very subdued,” said Absa.
Similar to activity, Absa said there was also some better news on the cost front as the purchase price index fell to its lowest level since the start of the year.
The index fell from 77.0 to 71.3, Absa reported.
“A stronger rand exchange rate (from the previous month) and a drop in fuel prices at the beginning of the month likely contributed to moderating cost pressures,” the bank said.
The June index showed a significant change in the outlook for the future.
The index measured expected business conditions in six months improved from a very low 43.7 to 52.4. While still below the long-term average, this indicates that purchasing managers expect a more positive rather than deteriorating situation towards the end of the year.
The table below shows the changes in PMI subcategories over the past three months.
IndexApril May JunePurchase price75,077,071.3Deliveries by suppliers53,053,947.4New sales orders44,347,545.6Operating activity47,647,748.9Inventories58,851,148.2Employment45,445,647.9
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