Financial institution Absa’s Purchasing Managers’ Index (PMI) closed out 2023 on a somewhat stronger footing, rising by 2.7 points to 50.9 index points in December. 

Absa said on January 8 that part of the uptick could be attributed to an encouraging increase in business activity. It was noted that businesses operating through the festive period also benefited from relatively less loadshedding in December.  

Given that new sales orders did not improve further after a solid increase in November, underlying demand for manufactured goods remained relatively weak at year-end.  

“Indeed, time will tell whether the improvement continues into 2024,” Absa said. 

The business activity index rose to 51.4 in December, up from 46 in November, while new sales orders ticked down to 46.3 from 46.6 in November. The employment index also remained below 50 points at 44.8.  

Absa noted concern that the intensifying crisis at South Africa’s ports seems to have contributed to supplier delivery times lengthening even further. It added that the lack of inputs required could hurt production and push up costs going forward.  

“It was somewhat surprising to see respondents turn notably more optimistic about business conditions over the longer term,” Absa said.  

The index tracking expected business conditions in six months’ time rose by 16.9 points to 57.9, which is the best level since the 63.8 index points reached in January last year.  

Absa believes this could reflect some hope that the worst of the local rail and port challenges will be behind us by midyear and that loadshedding could be less intense than last winter.  

More subdued inflation and lower borrowing costs, both domestically and globally, could also help on the cost front and spur demand. Still, the magnitude of the increase is significant, the bank noted.  

Regarding the current level of the PMI, Absa said it should be noted that the index remains below its long-term average, so while purchasing managers are notably more optimistic than through most of last year, they are still not excessively upbeat. 

Finally, Absa pointed out that the purchasing price index remained at a low level in December and ticked up only slightly relative to November, which saw it rise to 62.1 from 61.5.