Absa PMI rises for first time in three months

3rd December 2018

By: Marleny Arnoldi

Deputy Editor Online

     

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The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose to 49.5 index points in November from 42.4 in October – the first increase after three consecutive decreases.

The improvement was mainly owing to four of the five main subcomponents rising.

However, the PMI remains below the neutral 50-point mark, suggesting that the sector remains under pressure.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) said the rebound in data is encouraging and that manufacturing activity is improving despite low business and consumer confidence levels.

Seifsa remained hopeful that the increasing trend in the subcomponents would continue and eventually improve the PMI for December. "Progression in the PMI is importants towards boosting overall economic activity for the fourth quarter, also enabling business to start 2019 on a positive note," commented Seifsa economist Marique Kruger.

The new sales order index managed to edge to 50.3 points, which Investec said is owing to strengthening foreign demand.

Business activity managed to rise to 49.2, compared with 40.3 in October, owing to advances in orders. However, the level of the index signals that output growth is still muted.

The inventories index rose by 8.8 index points to 50.2 in November, while the employment index moved lower.

Encouragingly, the index tracking expected business conditions in six months’ time registered its first increase since February. The index rose by 6.9 index points to 48.6.

While the uptick is welcomed, Absa said the current level is still below the 50-point mark and more than 30 points below February’s “euphoric” level.

“One of the reasons behind the improvement in respondents’ sentiment towards the future may be a slight alleviation of pressure on the cost front. The purchasing price index declined by 6.1 points to 78.6 in November – the lowest level since June.

“This was likely driven by a stronger rand exchange rate and a sharp decline in the Brent crude oil price during the month. Going forward, a . . . significant fuel price decline on Wednesday may bring further relief for producers in December,” said Absa.

Investec noted that international manufacturing PMIs have converged lower this year, which signals weaker global growth momentum.

“Moreover, world goods trade growth slowed this year and the global PMI for new export orders declined into contractionary territory in September. As such, operating conditions for the local manufacturing sectors are likely to remain challenging.”

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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