The seasonally adjusted Absa Purchasing Managers’ Index (PMI) has risen by 4.1 index points to 54.8 in May.

Absa expected a month-on-month rebound after the PMI lost more than nine index points in April – coinciding with devastating flooding in KwaZulu-Natal and intense load-shedding across the country.

The index did not, however, recover all of the ground lost since March, when the PMI scored 60.

The average PMI for the first two months of the second quarter is so far six points below the average recorded in the first quarter.

Absa explains that the average for the business activity subindex for April and May is well below 50, suggesting that actual manufacturing output may record a quarterly contraction in the second quarter.

The good news is that a significant recovery in the new sales orders subindex underpins the increase in the headline PMI in May. Absa notes that domestic demand conditions normalised following the flooding, while export sales also returned to positive terrain.

This suggests that April’s deterioration on the export front was mainly caused by the Durban port disruptions, rather than signalling the start of a drop in global demand for South African goods.

Despite the solid rebound in demand, the business activity subindex was stuck just below the neutral 50-point mark in May, possibly owing to continued load-shedding and industrial action affecting output.

The purchasing price subindex edged down for a second month after reaching a record high in March. The further tick down seems to mirror what is happening globally, as global input cost pressure remains significant, Absa notes.

The index tracking expected business conditions in six months’ time increased from 55.4 in the preceding two months to 63.3 in May, mostly owing to a wide-scale expectation that cost pressures have peaked and may improve going forward.