The seasonally-adjusted Absa Purchasing Managers’ Index (PMI) nudged down to 49.2 in May, compared with 49.8 in April, signalling yet another deterioration in business conditions this year.

In the latest survey, respondents were notably more negative about business conditions going forward.

The index tracking expected business conditions in six months’ time fell to 43.7 in May from 51 in April.

Absa points out that this is the most pessimistic respondents to the PMI have been about the near-term outlook since the strictest phase of the Covid-19 lockdown in 2020.

Concerns may be fuelled by the possibility of higher stages of loadshedding during winter, it notes.

The business activity index remained unchanged from April, at 47.7, and still below the average of the first quarter. This suggests that the sector may once again detract from quarterly gross domestic product growth after an expected expansion in the first quarter.

The new sales order index was stuck in negative terrain for the fifth month, although it improved to 47.5 in May, from 44.3 in April.

Absa adds that export sales have held up well so far this year; however, respondents observed a notable deterioration in May.

The employment index also remained virtually unchanged at 45.6 in May, while the inventories index dipped to 51.1 in May from 58.8 in April. Absa says somewhat higher stock levels of materials and goods used in the production process could have been caused by continued improved supply chain performance, which would gel with the recent move in the supplier deliveries index.

The supplier deliveries index increased to 53.9 in May, from 53 in April.

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 two years.  

Faster deliveries of raw materials and intermediate goods result in a decline in the index (and detract from the headline PMI) because, pre-Covid-19, more rapid deliveries were often caused by weaker demand conditions – which is a sign of worsening business conditions in the sector.

Meanwhile, the purchasing price index ticked up once again in May. The significantly weaker rand exchange rate likely added to upward pressure on costs and offset the mitigating impact of the drop in fuel prices at the start of May.