The seasonally adjusted Absa Purchasing Managers’ Index (PMI) increased to 52.8 points in September, putting it back in expansionary territory after having declined to 43.6 points in August.

"The PMI (and official manufacturing data) has been volatile in recent months, but it is useful to note that September takes the average PMI for the third quarter to 49.6 points, just below the 50-point mark. This follows average PMIs of 47.9 for the second quarter and 48.2 for the first quarter. This is a positive sign for the sector," Absa points out.

It adds that, even more encouraging, is that the index tracking expected business conditions in six months’ time increased to 70.8 points in September from 61.3 in August.

"This is the highest index since January 2021 (71.3), indicating strong optimism about improving business conditions," Absa notes.

The business activity index increased by 11.8 points to 50.7 in September. In line, new sales orders increased by 18.5 points to 53.1 points in September.

Both domestic and export demand showed signs of improvement, with exports back on the expansionary side, like in July, and increasing for a third month this year. On the local consumer front, the recent interest rate cut adds to the expectation of a possible more positive demand story going forward.

The index measuring supplier performance decreased by 2.5 points, indicating an improvement (as this index is inversed).

"This could, encouragingly, mean that even with the big jump in activity and sales orders, suppliers are adjusting and coping with the increase," says Absa.

The improvement in the employment index is welcomed as it gained 6.8 points to 48.9 in September; however, it still remains in contractionary terrain.

"Volatility in the manufacturing sector in recent months means that manufacturers were cautious with employment decisions. Looking ahead, a sustained improvement in production is likely required before job growth moves into positive terrain," the financial services provider adds.

Further, the latest official data shows that producer price inflation for final manufactured products edged down to 2.8% year-on-year in August, below 3% for the first time in four years.

"The PMI survey is positive for the inflation outlook, with the purchasing price index decreasing to 61 points. This is the lowest reading for the year and since March 2018 (60.7). With a relatively stronger currency and declining crude oil prices, fuel price cuts in September supported the softening of production costs," Absa notes.