The seasonally adjusted Absa Purchasing Managers’ Index (PMI) declined for a fourth consecutive month in February, lowering to 44.3.

This had been the lowest level since the second half of 2009 when the economy started to recover from a deep recession that was triggered by the global financial crisis.

The current level was, however, at least six points above the lowest point recorded in 2009.

Absa and the Bureau for Economic Research on Monday explained that four of the five subcomponents of the headline PMI had declined in February, with only the supplier delivery index having increased month-on-month.

In particular, the business activity and new sales orders indices deteriorated sharply, after they had recorded improvements in January. Business activity slumped 10.9 points to reach 33.7 in February, while new sales orders plunged to 31.2, compared with 42.5 recorded in January.

Some respondents to the PMI survey cited load-shedding as a reason for the decline in business activity.

Absa said weakness in external demand seemed to have contributed to the drop in sales orders.

The index tracking expected business conditions in six months’ time fell to the lowest level since 2009.

“The current level of 38.7 index points is less than half of the index value recorded in February 2018 at the peak of Ramaphoria,” Absa stated.

A decline in the employment index to 37.5 corresponded with announcements of planned retrenchments across the economy.

The supplier deliveries index had recovered to 58.6 in February, compared with 50.8 recorded in January.

“Generally, the headline PMI and its five subindices play an important role in business decision-making processes and the uninspiring performance is worrisome.

"Specifically, it is disconcerting to note that the majority of the subindices deteriorated in February when compared to January, with the potential for the worrisome trend to continue,” said Steel and Engineering Industries Federation of Southern Africa economist Marique Kruger.

Investec commented that global PMIs released have shown that manufacturing activity in the Eurozone, the UK and some emerging market economies such as Russia and Turkey broadly improved in February.

However, many global manufacturers reported an intensification in supply chain disruptions in February related to the factory shutdowns in China amid the coronavirus outbreak. The asset manager said meaningful delays in shipments of inputs and intermediate products would undoubtedly constrain output in numerous countries in the coming months.

A deterioration in the external environment would compound domestic challenges already experienced by South Africa’s manufacturing sector such as persistently subdued domestic demand, weak electricity infrastructure and elevated operating costs particularly on the administered front.

"Evidently, there is still a long way to go in restoring business confidence in a generally difficult economic environment, underpinned by volatile petrol prices, rising energy and logistics costs, as well as uncertain production processes," said Kruger.