The Absa Purchasing Managers’ Index (PMI) slipped back to below 50 points in March, decreasing to 49.2 index points, from 51.7 in February.

Following robust improvements in February, both the business activity and new sales orders index declined in March, although the indices remained above the recent lows seen in January. Comments by respondents suggest that demand conditions were sluggish, Absa said in an April 2 media statement.

Following a surprisingly robust increase in February, the business activity index dropped to 44.5 in March from 48.6 in February. The activity has been volatile of late, but when considering the average of the first quarter of 2024 relative to the fourth quarter of 2023, the activity index is slightly down.

The new sales orders index declined to 45.5 index points in March from 49.9 in February. Respondents said demand remained weak.

Further, following an improvement in February, the export sales index fell once more in March.

"The PMI has been choppy in recent months, but the average for the first quarter of this year is equal to the final quarter of 2023. In the fourth quarter, the gross value added by the sector managed to eke out a 0.2% quarter-on-quarter expansion, with a more robust annual increase. The PMI generally suggests a similar experience is possible in the first quarter," Absa noted.

A potentially more positive development was the steep decline in the supplier deliveries index to 54.1 from 62. This is potentially positive news because it could be one of the first signs that congestion at the local ports is easing somewhat, and deliveries of imported supplies are now coming through faster, the PMI stated.

The supplier deliveries index is inverted, and faster deliveries result in a decline in the index, as faster deliveries during times of uncongested and unconstrained supply chains are generally seen as a negative for the sector as it means suppliers are less busy, owing to less demand from other clients, and, thus, goods are able to get to the respondent faster.

This could have played some role in March given that demand for manufactured goods weakened, assuming so did demand by manufacturers for inputs.

"However, given respondents' commentary over recent months and other anecdotal evidence, better-working supply chains are a more likely reason for the improvement in delivery times. This could, over time, also lift inventories of intermediate goods and raw materials, which ticked down slightly in March," Absa said.

The inventories index declined slightly to 47.6 in March from 48.9 in February, but remained well above a recent low of 37.7 in January.

Meanwhile, another positive development was the further improvement in sentiment towards business conditions in the future.

The index tracking expected business conditions in six months’ time rose to 62.1 points. This is the most upbeat respondents have been about business conditions going forward since the start of 2023, Absa said.

However, it is concerning that cost pressure continues to build, with the purchasing price index up for a fourth consecutive month to 74.6 from 72.2 in February. This is likely, to a large extent, driven by increases in the fuel price. The index is currently slightly above its long-term average reading, it noted.

"Further, the recent solid upward trend in the employment index to 54.4 from 49.2 is encouraging. While we tend to caution against reading too much into sudden movements in an index, the employment index has been on a steady increase in recent months. This could bode well for job growth in the sector."