After having ended the third quarter on a downbeat note, the Absa Purchasing Managers’ Index (PMI) also had a poor start to the fourth quarter, with the index having dropped to 45.4 points in October, from an upwardly revised 46.21 points in September.

In terms of the major subindices of the headline PMI, the biggest drag came from the seasonally adjusted business activity index, which declined by a further 2.8 points to a lowly 40.3.

"Given that the frequency and intensity of loadshedding eased notably in October, the weak performance from the activity index is perplexing. It is now back to the July level when prolonged disruptions on the N3 transport corridor most likely resulted in a (temporary) shortage of inputs. These transport issues contributed to weak manufacturing output.

"Although it is not clear why activity declined further in October, this does correspond with sustained weak readings on demand. Indeed, notwithstanding a minor increase, the PMI new sales orders index remained below 40 index points for the second consecutive month," the PMI states.

On the consumer front, elevated relative (food and fuel) prices, as well as restrictive borrowing costs, are depressing demand for local manufactured goods.

Further, in terms of industrial demand, constrained mining output, soft coal and platinum group metals prices and failing railway and port efficiencies could explain the lacklustre PMI production indicator.

Looking forward, the expectations of purchasing managers deteriorated sharply in October. The index measuring expected business conditions in six months was down by more than 12 points to 43.4.

"With key units of the Kusile power station resuming operations earlier than expected and the associated reduced loadshedding in October, adverse global events seem to have driven the poor expectations reading.

"Besides poor activity data in the Eurozone and the UK, major South African export markets, one can add the outbreak of war between Israel and Hamas in October. The expectations reading also declined sharply in February 2022 when Russia invaded Ukraine," the PMI states.