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Monday, 01 July 2024 16:32

Manufacturing sector activity contracts again in June.

By Lehlohonolo Lehana.

The seasonally adjusted Absa Purchasing Managers' Index (PMI) increased by 1.9 points to reach 45.7 points in June 2024, compared to 43.8 in May 2024.

While there is some improvement, it was the second consecutive month that the PMI remained below the 50-point mark. 

A PMI below 50 indicates the sector is in contraction, while a PMI above 50 points to expansion.

The PMIs showed an improvement in activity in April, but the Bureau for Economic Research (BER) at Stellenbosch University said the May Absa PMI was poor, with uncertainty ahead of the election causing a "wait-and-see" hold in demand.

The BER said it was important to highlight that PMIs are not designed to be sentiment indicators but a better PMI reading would suggest that underlying sentiment is more upbeat amid improving business conditions (and vice versa).

Absa said uncertainty about the composition of new government in the wake of the May 29 election could have also weighed on business.

"This could have extended the 'wait-and-see' approach noted in May and delayed orders," it said.

After weeks of intense deliberations, president Cyril Ramaphosa announced his cabinet line-up on Sunday, bringing new coalition partners including the Democratic Alliance to his 32-minister government.

The BER consumer inflation expectation survey for the second quarter will be released on Friday. The survey will provide more insight into the success, or otherwise, in achieving the Reserve Bank's goal to have inflation expectations of price setters, in particular, drift lower to the 4.5% inflation mark.

In the first quarter of 2024, the average inflation expectations of analysts, business people and trade union officials eased by 0.3 percentage points to 5.4% for 2024. Among the three social groups, only analysts expect that inflation will subside to below 5% and stabilise at 4.7% in 2025 and 2026.