South Africa is all over the place

Economic indicators in South Africa have been volatile in 2024, with the latest drop in the Absa Purchasing Managers’ Index (PMI) not surprising.

The Absa PMI dropped by 4.5 points in November 2024, reverting to contractionary territory at 48.1 index points, down from 52.6 in October.

This showcases some loss of momentum in the recovery seen over the last two months.

That said, the PMI and official data have been volatile this year, so the decline is not unexpected.

Although local inflation and interest rates have come down relative to earlier in the year, demand remains unpredictable.

The business activity index dropped by 6.6 points to 49 in November, while the new sales orders also fell to 45.9 points from 54.8 in October.

Despite some windfalls for the local consumer, some respondents said that domestic demand was still under pressure.

The positive news is that the improved global demand was sustained in November, with export sales better than in October.

The supplier deliveries index did not change drastically relative to October, but at a below-50 level, it was far below levels since the onset of the pandemic.

Absa and the Bureau for Economic Research (BER) said that this could be due to orders drying up or lower-than-expected activity, meaning suppliers could supply quicker to those who still demand goods, which would be bad news for the sector.

However, on a positive note, there could be a story of improving logistical problems.

“Issues with our South African ports have directly and indirectly burdened the sector’s performance by affecting the import of critical materials needed by local manufacturers and the export of output for the global economy,” said Absa and the BER.

“It is too early to tell which of these factors is driving the decline in supplier deliveries. It could also be a combination of both.”

With activity remaining volatile, employment suffered as manufacturers remained cautious with employment decisions.

The employment index also decreased by 2.5 points in November, going close to 46.9 points and remaining in contractionary territory for the eighth straight month.

The purchasing price index increased by 1.7 points to 61.7 in November, suggesting a risk of a slowing downward trend in production costs.

“This is likely due to a relatively weaker rand compared to October, bumping up the costs
of imported materials.”

The index measuring expected business conditions in six months remained steady at 62.3 in November, showing that manufacturers remain content about business conditions going forward.

“Despite more certainty on the local political front relative to the first half of the year, the global political outlook has become more complicated with concerns about global growth and trade dynamics following the election of Donald Trump as US president earlier in November.”

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