The seasonally adjusted Absa Purchasing Managers’ Index (PMI) stabilised at an elevated level in September.
This comes after large swings in the prior two months when several well-documented shocks pushed the PMI sharply lower in July, followed by a robust rebound in August.
At 56.8, the headline PMI index declined somewhat in September from the 57.9 points recorded in August.
Despite the month-on-month decline, the September reading was only slightly lower than the average of 57.1 recorded in the second quarter.
However, the average PMI reading for the third quarter was 4.4 points lower than in the second quarter.
In terms of the follow-through to actual third-quarter manufacturing production, the business activity subindex of the PMI is the more appropriate indicator to consider, Absa notes.
In this case, the movement in September was starker. After crashing in July and rebounding significantly in August, this index declined by almost five points to 53.8 in September.
In terms of the quarterly average, the business activity index measured 46.3 points in the third quarter, down notably from just more than 55 in the second quarter.
The weaker activity levels in the third quarter are in line with the trend in the Absa quarterly manufacturing survey and suggest that the manufacturing sector is likely to be a drag on the quarterly gross domestic product momentum in the third quarter, Absa states.
The new sales orders index also lost ground in September, albeit less so than the activity component. Indeed, at 59.2, new sales orders remained elevated.
"There seems to have been some softening in export demand, which would be consistent with the recent cooling in the PMI indicators for the Eurozone and the UK.
"Even so, respondents continue to expect an improvement in overall business conditions over the next six months," Absa reports.
After softening in July, the purchasing price index increased for the second consecutive month in September.
Along with supplier delivery times that lengthened again in September, the rise in input costs may reflect the impact of worsening global supply-side bottlenecks.
Looking ahead, besides the cost implication of supply and shipping constraints, the much weaker rand exchange rate in the latter part of September and the recent further rise in the Brent crude oil price should keep input cost pressures elevated in the foreseeable future, Absa says.