All signs pointing in the right direction for South Africa

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) is now in expansionary territory, with all sub-indices going in the right direction.

The ABSA PMI increased from 34.6 points in August 2024 to 52.8 points in September 2024.

The PMI is now in expansionary territory following a decline in August. The PM

The PMI and other manufacturing data have been volatile in recent months. However, it is useful to note that September brings the average PMI for the third quarter to 49.6 points, slightly below the 50-point mark.

This comes of the back of average PMIs of 47.9 for Q2 and 48.2 for Q1. which is a positive sign for the sector.

In addition, the index tracking expected business conditions in six months increased from 61.3 points to 70.8 points in September, which is an encouraging sign.

This is the highest index since January 2021 (71.3), showing strong optimism about improving business conditions.

The business activity index increased by 11.8 points to 50.7 in September.

This is in line with new sales orders, which increased by 18.5 points to 53.1 points in September.

Both domestic and export demand showed improvement, with exports back on the expansionary side.

The recent interest rate cut also raises the possibility of a more positive demand story in the future on the consumer side.

The index measuring supplier performance dropped by 2.5 points, but this actually indicates an improvement as the index is inversed.

This could mean that even with the big jump in activity and sales orders, suppliers are still coping with the increase.

The employment index also gained 6.8 points to reach 48.9 in September, but this is still in contractionary terrain.

Volatility in the manufacturing sector in recent months reflects the cautious attitude the manufacturers took with employment decisions.

A sustained improvement in production is probably required before job growth moves into positive terrain.

“The latest official data shows that producer price inflation for final manufactured products edged down to 2.8% y-o-y in August, below 3% for the first time in four years,” said the Bureau for Economic Research (BER) who compile the PMI.

“The PMI survey is positive for the inflation outlook, with the purchasing price index decreasing to 61 points. This is the lowest reading for the year and since March 2018 (60.7).

“With a relatively stronger currency and declining crude oil prices, fuel price cuts in September supported the softening of production costs.”

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