Photo by: Duane Daws
After a solid first-quarter performance, the seasonally adjusted Absa Purchasing Managers' Index (PMI) slumped in April 2017.
The Bureau for Economic Research (BER) index fell to 44.7 index points from an average of 51.9 during the first quarter.
The decline was relatively “broad based”, with key subcomponents measuring business activity and inventories slumping to multi-year lows.
“While the deterioration is worrying, the magnitude of the drop may not be reflected fully in official data as actual growth was already weaker in January and February than signalled by the higher PMI readings,” BER said on Tuesday.
The Steel and Engineering Industries Federation of South Africa (Seifsa) said the sharp fall in April’s PMI was “strongly indicative of the political noise inherent in the system”, starting the second quarter of the year with “severe headwinds” that would not bode well for the economy.
“The firing of former Finance Minister Pravin Gordhan, the subsequent downgrades to the country’s credit borrowing capacity and the incessant political noise inherent in the system all have the capacity to send the economy down an unfortunate low-growth trajectory,” said Seifsa senior economist Tafadzwa Chibanguza.
The business activity index plunged by 16.5 points in April – the second biggest decline on record – which, at 37 points, is the lowest level since 2009, while new sales orders tracked downwards 8.3-points to 44.4 during the month under review, driven by the expectation of weaker demand from local customers.
The inventories index registered a 10.7-point drop to well below the neutral 50-point mark at 41.3, its lowest level since 2009.
“This was the first full survey after the recent Cabinet reshuffle and subsequent sovereign credit rating downgrade. It is likely respondents now anticipate economic growth and domestic demand to be weaker than before. As such, they have likely scaled back expectations for orders and activity growth going forward,” the BER pointed out.
This was reflected in the decline of the index measuring expected business conditions in six months’ time, which fell to 55.8 points in April, from 68 points in March, the firm said.
The employment index remained more or less unchanged at just above 50 index points in April, while the purchasing price index rose by 6.4 points.
The purchasing commitments index plunged 14.7 points to 35.9 index points in April.