Absa PMI records sharp contraction in August
Absa has reported a month-on-month drop of 8.8 points in the seasonally adjusted Purchasing Managers’ Index (PMI) for August to a level of 43.6, which reflects a shift back to contractionary territory in South Africa’s manufacturing sector.
The decline from 52.4 points in July to 43.6 in August underscores the challenges faced by the sector amid high but slowing inflation, elevated borrowing costs and sluggish demand globally and locally.
The seasonally adjusted PMI increased by 6.7 points from 45.7 in June to 52.4 in July, with the August reading marking the biggest fall in the PMI for the year to date.
The business activity subindex dropped by 11.9 points in August to 38.9, while new sales orders decreased to 34.6 points.
Many respondents to the PMI cited weaker domestic sales and orders, while export sales also contracted, likely owing to supply chain issues and weak economic performance in key markets such as Europe and China.
The index measuring supplier performance improved by 4.5 points, indicating reduced pressure on suppliers, possibly owing to the decrease in new orders.
The employment index continued its decline, remaining in contractionary territory for the second consecutive month, influenced by the sector's volatile activity levels.
The purchasing price index remained relatively unchanged, aligning with market expectations and recent inflation data, which suggest that inflation has peaked.
Stable oil prices and a stronger currency contributed to a slight decrease in fuel prices at the beginning of August, with more significant cuts expected in September.
Absa says there is an optimistic yet cautious outlook in the manufacturing sector.
Although the index tracking expected business conditions in six months' time decreased to 61.3 points in August from 69.4 in July, it remains at a relatively high level, which signals an anticipated improvement in business conditions going forward.
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