Bright spark for South Africa’s economy

 ·2 May 2024

South Africa’s manufacturing sector has received a boost following a month of no load shedding in April.

The latest seasonally adjusted Absa Purchasing Managers’ Index (PMI) for April improved from its below-the-neutral 50-point mark dip in March,

The PMI rose from 49.2 points in March to 54 in April.

Absa said that the rebound comes from improved business activity, while better domestic demand led to higher new sales orders.

“A full month of no load-shedding was likely positive for sustained business activity. In all, the survey results reflect a good start to the second quarter of 2024,” said Absa and the Bureau for Economic Research.

The business activity index improved from 44.5 in March to 57.2 in April, while new sales orders increased from 45.5 to 55.6.

“Some comments still point to demand remaining sluggish (although the survey outcome suggests it is much better than in March), but more than 30 days of no load-shedding has likely supported business conditions in the factory sector.”

“In this regard, Eskom has announced that there has been sustained improvement in generation by the coal-fired plants, sufficient emergency reserves, and lower demand for Eskom power.

“Eskom has, however, cautioned that load-shedding is projected to return in the winter months.”

Export sales were also muted, indicating that better domestic demand supported the improvement in the sales orders index.

Moreover, the supplier deliveries index increased (negative) from 54.1 in March to 57.4 in April. The supplier deliveries index is inverted, so any increases reflect a problem for purchasing managers.

The improvement in March was due to better working supply chains leading to faster supplier deliveries.

The increase in April is indicative of slower deliveries, which could have been due to more demand from across the nation’s factories, keeping suppliers busy.

That said, the reading remains far below the recent high when local port and rail issues hurt supply chains.

Looking ahead, the index for expected business conditions over the next six months decreased from 62.1 in March to 55.7 in April.

“The expectation of a return of load-shedding, relative to no disruptions currently, could explain this.”

“There might also be concerns about fewer interest rate cuts in South Africa and elsewhere compared to earlier expectations.”

The purchasing price index dropped slightly from 74.6 in March to 72.4 in April.

“As much as this is welcomed, it remained at a relatively high level, reflecting sustained cost pressure.”

“The relatively weaker rand exchange rate and higher (and volatile) oil prices indicate sustained upward price pressures on manufacturers.”

Business activity37.148.644.557.2
New sales orders37.249.945.555.6
Supplier deliveries*
Purchasing prices*67.572.274.672.4

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