South African PMI fell sharply in February
The Absa Purchasing Managers’ Index (PMI) fell sharply to 48.8 index points in February, indicating a significant deterioration in business conditions in the factory sector.
The PMI is a seasonally adjusted economic activity index based on a survey conducted by the Bureau for Economic Research (BER) that is sponsored by Absa.
This February fall is a continuation of the index’s downward trajectory. PMI was at 53.0 in January, a slight fall from its four-month rise, which ended at 53.1 in December 2022.
This most recent decrease marks the first time since September 2022 that the headline index fell below the neutral 50-point mark.
The business activity and new sales orders indices in the factory sector were both in contractionary terrain, and demand decreased for a second consecutive month.
The survey period used to determine February’s PMI also included seven continuous days of stage 6 load-shedding, which was likely top of mind for many survey respondents.
One silver lining can be found in the rise in export sales to the best level in a year.
However, this increase implies producers that only supply locally likely had a tough month.
In line with weaker output, the employment and inventories indices were below the neutral 50-point mark.
The index measuring expected business conditions in six months also sharply declined in February, falling to 46.8 points – the lowest level since May 2020, during the Covid lockdown.
On the other side, the purchasing price index surged higher for a second month to reach its highest level since September 2022.
The survey took place while the rand was weak, which particularly affected the costs of imported raw materials and intermediate goods. A largely stable Brent crude oil price capped the increase in cost pressure.
The surge in the PMI’s price index could suggest a renewed acceleration in factory-gate prices. However, the index remains well below the peak reached in the first months of 2022.
Purchasing Managers’ Index
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) fell sharply to 48.8 index points in February, a significant decrease from January, where the index was at 53.0.
The solid performance of the business activity index in January was not sustained and fell sharply back to December’s level.
New sales orders
The new sales orders index ticked down to its lowest level since October 2022, despite a solid improvement in export sales.
The employment index declined further in February and is now firmly back below the neutral 50-point mark following an unexpected rise above this level in December.
The inventories index slumped back to December’s level, falling below the neutral 50-point mark. Barring the 46.3 recorded in December, this is the lowest level since July 2021.
The supplier deliveries index continued its recent downward trend and moved closer to its long-term average level (around 53 points). The recent downward move is likely due to the continued weakness in demand, with lower demand for inputs resulting in more responsive deliveries.
The purchasing price index surged higher for a second month to reach the highest level since September 2022. The survey took place while the rand was very weak (against the US dollar), largely trading above R18/$. This would have filtered through to the costs of imported raw materials and intermediate goods.