https://www.engineeringnews.co.za
Africa|Business|Environment|Financial|Infrastructure|Manufacturing|Services|Manufacturing |Infrastructure
Africa|Business|Environment|Financial|Infrastructure|Manufacturing|Services|Manufacturing |Infrastructure
africa|business|environment|financial|infrastructure|manufacturing|services|manufacturing-industry-term|infrastructure

Absa’s PMI at lowest level since September 2019

3rd February 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

Font size: - +

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) started the year on the back foot and declined further in January, decreasing by 1.9 points to 45.2, the lowest level since September 2019.

The performance of the five major subcomponents was mixed, Absa said on Monday, noting that two indices had recovered somewhat from multiyear lows reached in the previous month, while the three other indices declined in January.

The business activity and new sales orders indices both increased somewhat after recording sharp declines in December 2019. However, coming off a low base, Absa said both indices remained at relatively weak levels.

“This suggests that sustained weak demand is weighing on activity growth,” said Absa economist Miyelani Maluleke.

In addition, the index tracking the backlog of sales orders fell to a more than ten-year low in January, which Absa said, “does not bode well for a recovery in activity growth going forward”, considering that it is another sign of soft demand.

This is further highlighted through South Africa’s manufacturing sector, which, according to financial services provider Investec, continued to signal a deterioration in operating conditions, with the PMI gauge declining to 45.2 index points from 47.1 in December 2019.

According to Investec, this was mainly underpinned by deepening rates of contraction in the backlog of sales orders and employment that dropped to ten- and six-year lowers, respectively.

Further, amid weak domestic and external demand, the new sales orders subindex remained entrenched in contractionary territory in January, although the pace of decline abated somewhat.

In January, manufacturers also experienced increased cost pressures, which Investec said “is likely linked to higher fuel prices”.

However, Investec said that there is some indication that the downturn in global manufacturing may have stabilised with scope for an improvement into 2020, barring a severe global growth and trade fallout from the coronavirus.

Purchasing inventories erased December’s gain and slumped back to 43.9 index points.

The only subcomponent to come in above the neutral 50-point mark was supplier deliveries, though only just at 50.8 points, which Absa noted “was sharply down” from the 56 points recorded last month.

“Worryingly, even as current conditions deteriorated further, respondents still turned more pessimistic about the business environment going forward,” said Maluleke.

The index tracking expected business conditions in six months’ time slumped to the lowest level in more than a year.

Uncertainty about the frequency and severity of load-shedding in future and the strength of the global economy, and therefore external demand, likely dimmed prospects for the future, Absa noted.

Business activity also contracted at a slower rate, which Investec said could be attributable to a rebound effect from the electricity supply disruptions in December that affected production.

Should the external environment turn more favourable over the course of the year, a recovery in South Africa’s manufacturing sector will still be hindered by subdued domestic demand, weak electricity infrastructure and elevated operating costs, particularly on the administered front.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

Showroom

Stewarts & Lloyds
Stewarts & Lloyds

Stewarts & Lloyds today supplies steel and tube, pipe and fittings, valves, pumps, irrigation, fencing, profiling and roofing products. The cash...

VISIT SHOWROOM 
Willard
Willard

Rooted in the hearts of South Africans, combining technology and a quest for perfection to bring you a battery of peerless standing. Willard...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.228 0.29s - 180pq - 2rq
Subscribe Now