The seasonally adjusted Absa Purchasing Managers’ Index (PMI) declined by 4.5 points in November, reverting back to contractionary territory at 48.1 index points.

The company says this points to some loss of momentum in the recovery seen over the last two months.

However, the PMI (and official data) has been volatile this year, so this is not unexpected, it points out.

“While local inflation and interest rates have come down relative to earlier in the year, demand remains unpredictable,” the company points out.  

The business activity index decreased by 6.6 points to 49 in November.

In line with this, new sales orders fell to 45.9 points from 54.8 in October.

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

Positively, however, the improved global demand was sustained in November, with export sales better than in October.

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

This could be owing 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, the company avers.  

On a more positive note, it highlights that 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. 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).

“As activity remains volatile, employment suffers as manufacturers remain cautious with employment decisions,” the company points out.

The employment index decreased by 2.5 points in November, edging to 46.9 points and remaining in contractionary territory for the eighth consecutive month.

The purchasing price index ticked up by 1.7 points to 61.7 in November, which the company says indicates a risk of a slowing downward trend in production costs.

It adds that this is likely owing to a relatively weaker rand compared to October, increasing the costs of imported materials.

The index measuring expected business conditions in six months’ time remained steady at 62.3 in November, which the company says indicates that manufacturers remain positive 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, the company warns.