Absa Purchasing Managers’ Index’s rise short-lived
The Absa Purchasing Managers’ Index (PMI) edged down in May – putting an end to the short-lived rise seen in April.
The PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) and sponsored by Absa.
April’s PMI stood at 49.8 index points – a considerable increase from the 48.1 index points recorded for March. However, the PMI decreased marginally to 49.2 in May, signalling a deterioration in business conditions for four consecutive months.
In addition to the downbeat assessment of the current environment, respondents were considerably more negative about business conditions in the future.
The index tracking expected business conditions in six months fell to 43.7 in May, a notable decrease from the 51 index points recorded in April.
This is the most pessimistic respondents have been about the near-term outlook since the strictest phase of South Africa’s Covid-19-lockdown three years ago.
Eskom’s confirmation of the possibility of higher load-shedding during winter likely contributed to the souring in sentiment.
Business activity
The business activity index was virtually unchanged in May from a subdued April, with only a 0.1 difference between the two months.
The intensity of load-shedding between the two months was roughly similar and likely did not weigh more or less on activity in May than in April.
New sales orders
While new sales orders saw a three-point improvement in May, the index remained stuck in negative terrain for the fifth straight month.
Export sales have held up well through 2023 so far, but respondents noted a notable deterioration in export sales in May.
Employment
May’s employment index was virtually unchanged for a third month, increasing from 45.4 index points to 45.6.
This is not unexpected, given little movement in the demand and activity indicators.
Inventories
Following a hopeful surge in April, the inventories index moved lower in May – albeit staying above the neutral 50-point mark for a second month.
Generally, somewhat higher stock levels of materials and goods used in the production process could have been caused by continued improved supply chain performance. This would be in accordance with the recent move in the
supplier deliveries index.
Supplier deliveries
The supplier deliveries index for May continued the rise seen in April but stayed at a relatively low level compared to readings since the onset of the pandemic.
Disruptions on the local rail network may have contributed to the uptick, as general signs are that global
supply chains are working much better compared to the previous year or two.
Faster deliveries of raw materials and intermediate goods result in a decline in the index – and detract from the headline PMI – because pre-Covid, more rapid deliveries were often caused by weaker demand conditions.
Purchasing prices
The purchasing price index ticked up once again in May, growing from 75.0 to 77.0 index points.
The significantly weaker rand exchange rate likely added to upward pressure on costs and offset the mitigating impact of the fuel price decrease seen at the start of May.
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