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Friday, 01 December 2023 18:03

Absa PMI increases for first time in two months.

By Lehlohonolo Lehana.

Manufacturing activity contracted at a slower pace in November, with survey respondents flagging congestion at the ports and power cuts among constraints.

The seasonally-adjusted Absa Purchasing Managers' Index (PMI) rose to 48.2 points in November from 45.4 in October, staying below the 50-point mark that separates expansion from contraction

The PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) and sponsored by Absa among a representative group of purchasing managers in the South African manufacturing sector. These purchasing managers have to indicate each month whether a particular activity for their company increased, decreased or remained unchanged.

According to the BER this was the first increase after two months of a decline in the headline index, although it failed to return to positive terrain. The business activity and new sales orders indices also still point to declining activity and demand, although it was at a slower rate than before.

The business activity index rose 5.7 points to 46, while new sales orders booked an even bigger 6.9-point increase in November to 46.6 points. The BER says while these solid improvements are encouraging and point to some recovery in underlying demand filtering through to better activity, there are some worrying signs in the survey results.

These worrying signs include the fact that higher activity did not filter through to the employment index, which remained largely unchanged at a low 41.1 index points in November. Another concern is that the congestion at South Africa's ports is seemingly resulting in a slower delivery of supplies.

Respondents note that the unavailability of inputs required could hurt production abilities and push up costs. 

Exports were also under pressure. Worryingly, it seems like it will take at least a few months for the disruptions at the harbours to clear up, which means that this could have a lingering negative impact on the sector.

Indeed, the expected business conditions index declined further in November and is now at its weakest level since the strictest months of South Africa's Covid-19 lockdown in 2020.