Absa Purchasing Managers’ Index increases

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose firmly back into expansionary terrain in November.

The PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research and sponsored by Absa.

The monthly surveys are conducted under a representative group of purchasing managers in the South African manufacturing sector.

These purchasing managers have to indicate each month whether a particular activity, like new sales orders, for their company has increased, decreased or remained unchanged.

The index rose to 52.6 points, up from 50 in October and an average level of 49.6 recorded in the third quarter.

On its own, this suggests that the manufacturing sector could book another slight expansion in the fourth quarter.

However, next week’s official data on factory production in October – and the extent to which the prolonged strike at Transnet impacted this – will help to firm up this view.

Encouragingly, business activity and new sales orders improved for a second straight month after both had plunged lower during the load-shedding-heavy month of September.

New sales order volumes expanded for the first time since May 2022.

Even though it improved, the activity index remained just below 50 points, while the employment index also lingered at a much lower level.

As cautioned in the past, higher demand and output levels would likely need to be sustained for some time for any improvement in staffing levels to occur.

Encouragingly, purchasing managers turned more upbeat about business conditions going forward.

The index tracking expected business conditions in six months’ time rose to 51.7 from 49.2 in October.

The purchasing price index remained largely unchanged in November.

It would correspond to price pressure at the start of the production process remaining elevated but less intense than at the beginning of the year.

The recent decline in the Brent crude oil price and a somewhat stronger rand exchange rate (against the US dollar) bode well for the general downward trend to continue through the year’s final month.

Still, with load-shedding expected to continue, the (more) frequent usage of diesel-powered generators adds to the cost burden of producers.

Purchasing Managers’ Index