Real Economy News in Real Time
R/€ = 15.50 Change: 0.05
R/$ = 13.87 Change: -0.01
Au 1426.20 $/oz Change: -1.50
Pt 853.61 $/oz Change: 3.13
 
 
Real Economy News in Real Time
R/€ = 15.50 Change: 0.05
R/$ = 13.87 Change: -0.01
Au 1426.20 $/oz Change: -1.50
Pt 853.61 $/oz Change: 3.13
 
 
BACK

Absa PMI falls below 50-point mark, Seifsa concerned about unresponsiveness to improving confidence

3rd April 2018 BY: Marleny Arnoldi
Creamer Media Online Writer

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) on Tuesday dropped back below the neutral 50-point mark in March, after encouraging improvements during the first two months of the year. The index shed 3.9 points to reach a level of 46.9 points in March, down from 50.8 in February.

The key drivers of the fall in the headline PMI were sharp declines in the business activity and new sales order indices, while inventories continued to decline, the Bureau for Economic Research (BER) stated on Tuesday.

Advertisement

The business activity index fell by 8.1 points to 46.0, while new sales orders declined by a similar margin to reach 44.5 in March. Respondents indicated that exports declined during March, which could explain the deterioration in overall sales orders.

Exports could be affected by the stronger rand exchange rate of late, which can weigh on competitiveness of local goods in international markets, said the BER.

Advertisement

In turn, the dip in demand filtered through to lower activity levels. The inventories index fell further below the neutral 50-point mark to 41.4, which is the lowest level since April 2017.

After three months of improvements, the index tracking expected business conditions in six months’ time declined from its best level since 2001, falling from 79.1 to 73.7 in March.

Moreover, the BER reported that the purchasing price index edged slightly higher in March, after three straight declines. The uptick was likely driven by the slightly higher brent crude oil price during the month, while the rand was also marginally weaker against the US dollar.

Meanwhile, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) noted that the PMI indicated that the data was still unresponsive to slowly improving business and investor confidence.

Seifsa economist Marique Kruger said the federation was disappointed with the data, as the expectation was for a continuous improvement in the composite PMI index in the forthcoming periods, thereby replacing last year’s encouraging performance from July 2017 to November 2017, before rebounding in December 2017. 

“The volatility is a cause for concern, especially given the poor performance of both the business activity and new sales orders sub-indices, which decreased significantly,” she explained.

Kruger added that the performance of the lead indicators highlighted the inability of businesses to secure more new deals against the backdrop of an improving domestic demand and easing political tensions, complemented by ratings agency Moody’s Investors Service.

“Moody’s unexpected upgrade of the outlook on South Africa’s rating from negative to stable, and its decision to keep its investment-grade rating on South Africa, bodes well for the economy.”

However, she said it appeared that businesses were still playing catch-up, judging by the performance of the lead indicator (business activity), which acted as a gauge for the month ahead.

Seifsa expected the data to climb back above the 50-point neutral level in April 2018, as the lag effect of businesses taking advantage of an improving socio-political and economic climate started trickling in.

“Also, given the current economic environment, business can plan production processes ahead with some degree of certainty, without having to worry much about rising domestic costs of doing business,” Kruger said. 

EDITED BY: Chanel de Bruyn Creamer Media Senior Deputy Editor Online
EMAIL THIS ARTICLE SAVE THIS ARTICLE ARTICLE ENQUIRY
Advertisement
 
 
Prev Next