South African factory activity expands in December - ABSA PMI.
By Lehlohonolo Lehana.
The Absa Purchasing Managers's Index (PMI) rose by 2.7 points to 50.9 index points – above the neutral reading of 50 – in December 2023, partially due to the encouraging increase in business activity.
Absa said, that part of the uptick could be attributed to an encouraging increase in business activity. It was noted that businesses operating through the festive period also benefited from relatively less loadshedding in December.
Given that new sales orders did not improve further after a solid increase in November, underlying demand for manufactured goods remained relatively weak at year end.
"Indeed, time will tell whether the improvement continues into 2024," Absa said.
The business activity index rose to 51.4 in December, up from 46 in November, while new sales orders ticked down to 46.3 from 46.6 in November. The employment index also remained below 50 points at 44.8.
Absa noted concern that the intensifying crisis at ports seems to have contributed to supplier delivery times lengthening even further. It added that the lack of inputs required could hurt production and push up costs going forward.
"It was somewhat surprising to see respondents turn notably more optimistic about business conditions over the longer term," Absa said.
The index tracking expected business conditions in six months' time rose by 16.9 points to 57.9, which is the best level since the 63.8 index points reached in January last year.
Absa believes this could reflect some hope that the worst of the local rail and port challenges will be behind us by midyear and that loadshedding could be less intense than last winter.
More subdued inflation and lower borrowing costs, both domestically and globally, could also help on the cost front and spur demand. Still, the magnitude of the increase is significant, the bank noted.
Africa's most industrialised economy has suffered power cuts for more than a decade which have held back growth, reaching record levels last year lasting up to 10 hours a day.