[ad_1]
The Absa Purchasing Managers’ Index (PMI) rose to 49.8 index points in April 2023, up from 48.1 in March.
This marks an upward turn for PMI, which declined between February (48.8) and March (48.1). However, overall business activity is still tracking lower.
The index provides monthly feedback from business managers and is determined through surveys conducted with purchasing managers working in the manufacturing sector of the country.
Absa takes the feedback from industry heavyweights and processes all the data to create an index, with 50 representing stability, higher values indicating increased activity, and lower levels meaning decreased activity.
Absa said that despite the index improving, it failed to edge back to the neutral 50-point mark as business activity and new sales orders worsened relative to March.
“Indeed, the headline PMI would have deteriorated further if not for a significant improvement in the inventories index.”
“The underlying survey results suggest that the sector experienced another tough month at the start of the second quarter amid intense load-shedding hurting output and demand remaining under pressure,” said Absa.
Suppressed demand and consistent load shedding adding pressure is a viewpoint shared by economists and analysts alike. In its latest Economic Monitor report, Nedbank said that its data points to the underlying operating environment for the business being unlikely to improve due to load shedding.
The graph below shows the fluctuation in PMI over the course of the last few years:
The marker with the highest increase was the inventories index which surged to its highest level since mid-2022 in April. Higher levels of business inventories may indicate that a manufacturer is doing well in producing its goods.
The inventories index rose from 47.7 in March to 58.8 in April:
“While we would caution against reading too much into a single month’s movement, the rapid rise in stock levels of materials and goods used in the production process could have been caused by improved deliveries of goods on the back of better working supply chains – which would gel with the recent move in the PMI supplier deliveries index.”
“In addition, or perhaps alternatively, weaker demand for final goods or disruptions to the production process – due to load-shedding – could also have resulted in inventories of input products being higher,” said Absa.
According to Absa, business activity (output) edged lower in April to 47.6 index points, and on the demand front, new sales orders moved down more decidedly than output and reached the worst level since September 2022.
The index declined to 44.3 from 48.5 in March.
The table below shows the changes in index’s over the course of the last three months:
| Index | February | March | April |
|---|---|---|---|
| Purchasing Price | 78.6 | 78.1 | 75.0 |
| Supplier Deliveries | 55.3 | 50.8 | 53.0 |
| New Sales Orders | 49.4 | 48.5 | 44.3 |
| Business Activity | 45.5 | 48.1 | 47.6 |
| Inventories | 46.5 | 47.6 | 58.8 |
| Employment | 47.1 | 45.4 | 45.4 |
In terms of expected business conditions for the next six months’ time, the index fell from 55.5 to 51 in April, with purchasing managers only foreseeing a marginal improvement in future business conditions.
Absa said this is likely due to the expectation of a harsh winter ahead with load shedding and uncertainty regarding global demand strength, especially in European trading partners where the manufacturing sector is under pressure.
Despite this, Absa said there is a potential positive for the sector as reduced pressure on costs is expected through the remainder of the year, except for load-shedding mitigation costs. Although input prices are unlikely to decrease, the rapid pace of annual cost increases for producers is set to become much less intense through 2023.
Read: Alarm bells over minimum wage in South Africa
[ad_2]
Source link