By Bhargav Acharya and Lehlohonolo Lehana.
South African manufacturing activity improved in April, a Purchasing Managers’ Index (PMI) survey showed on Thursday, helped by there being no rolling power cuts for the whole of last month.
The seasonally-adjusted PMI rose to 54.0 points in April from 49.2 in March, rising above the 50-point mark that separates expansion from contraction.
“Through April, South Africa experienced no load-shedding, which would have been positive for economic activity,” Absa, which sponsors the PMI, said in a statement, using a local term for power cuts.
Citing an improvement in the generation outlook, state power utility Eskom said last week that it would probably be able to limit power cuts over the winter months, running roughly from April to August.
Meanwhile, export sales remained more muted, suggesting that better domestic demand supported the improvement in the sales orders index.
The supplier deliveries index increased to 57.4 in April, following a welcome decline to 54.1 in March. The slight uptick in April, indicative of slower deliveries, could have been the result of higher demand from across the factory sector keeping suppliers busy, Absa notes.
It adds, however, that the reading remains below the recent highs when local port and rail issues hampered supply chains.
The index for expected business conditions in six months declined to 55.7 in April from 62.1 in March. The expectation of a return of loadshedding, relative to no disruptions currently, could explain this. There might also be concerns about fewer interest rate cuts in South Africa and elsewhere compared with earlier expectations, the bank says.
The purchasing price index declined slightly to 72.4 points from 74.6 in March.
“As much as this is welcomed, it remained at a relatively high level, reflecting sustained cost pressure. The relatively weaker rand exchange rate and higher (and volatile) oil prices indicate sustained upward price pressures on manufacturers,” Absa states.