By Lehlohonolo Lehana.
The Absa purchasing managers index (PMI) fell to a two-year low in June, with all five subcomponents used to calculate the headline PMI falling below the neutral 50-point level that separates expansion from contraction, pointing to a worsening of business conditions in the manufacturing sector.
The seasonally adjusted Absa PMI, is published in partnership with Stellenbosch University’s Bureau for Economic Research (BER), fell to 47.6 points in June from 49.2 points in May.
“A key drag on the sector seems to come from weak demand, with the new sales orders index edging down once again as the decline in export sales deepened and domestic demand remains under pressure,” Absa said in a statement.
However, the survey signalled that business conditions will improve by the end of the year, Absa added.
Absa takes the feedback from industry heavyweights and processes all the data to create the index, with 50 representing stability, higher values indicating increased activity, and lower levels meaning decreased activity.
Absa said the improvment in business activity was likely back to signficantly less load shedding during the day this past month as weak demand conditions ‘thwarting a bigger recovery’.
For large portions of June, load shedding was suspended during the day as cool weather, lower demand and improved generation helped the power utility Eskom keep rolling blackouts to around roughly stage 1.