The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose to 49.8 index points in April from 48.1 points in March.

The index, however, remains below the 50-point neutral mark, as business activity and new sales orders worsened in April.

Indeed, Absa explains, the headline PMI would have deteriorated further were it not for a significant improvement in the inventories index.

The PMI survey finds that the sector experienced another tough month at the start of the second quarter amid intense loadshedding and demand remaining under pressure.

The inventories index surged to its highest level since mid-2022 in April.

“While we would caution against reading too much into a single month’s movement, the rapid rise in stock levels of materials and goods used in the production process could have been caused by improved deliveries of goods on the back of better working supply chains, which would gel with the recent move in the PMI supplier deliveries index,” the bank notes.

Absa adds that weaker demand for final goods and disruptions to the production process owing to loadshedding could also have resulted in inventories of input products being higher.

The business activity index declined to 47.6 points in April, compared with 48.1 in March, while new sales orders dwindled to 44.3 in April, from 48.5 in March.

The employment index stayed unchanged at 45.4 in April, which will not likely see positive movement without a sustained rise in production and demand.

The supplier deliveries index ticked up in April to 53, from a level of 50.8 in March, largely owing to improved global supply chain performance and, therefore, faster raw materials and intermediate goods deliveries.

Looking forward, purchasing managers now only see a marginal improvement in future business conditions.

The index tracking expected business conditions in six months’ time declined from 55.5 in March to 51 in April.

The expectation of a harsh winter ahead in terms of loadshedding and uncertainty about the strength of global demand, with the manufacturing sector in major European trading partners being under pressure, likely depressed expectations.

A potential positive for the sector is that reduced pressure on costs can be expected through the remainder of the year.

The purchasing price index moved lower in April to 75, from 78.1 in March. Absa explains that the decline in the diesel price at the start of the month, with another price drop expected in May, will alleviate some of the upward pressure on costs.

To be sure, input prices are unlikely to come down, but the rapid pace of yearly cost increases producers had to deal with through 2022 is set to become much less intense through the rest of this year.

The notable exception is set to be loadshedding mitigation costs, such as powering diesel generators.