[South Africa] Absa PMI rose to 52.1 index points in July, report
06-08-2019 08:46:00 | by: Pie Kamau | hits: 3175 | Tags:

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) measured 52.1 index points in July, up from 46.2 in June.

This is the first reading above the neutral 50-point mark since December 2018 with the improvement well supported by the underlying subcomponents. Four of the five major subcomponents came in above the neutral 50-point mark, signalling an expansion in activity.

However, given growing concerns about the health of the global manufacturing sector, it remains to be seen whether this improvement can be sustained going forward. While purchasing managers continue to expect conditions to improve in six months’ time, they are less optimistic than before.

The expected business conditions index declined to 54.5 index points in July, down from 62.3 just two months before and more than 12 points below the level recorded at the start of the year.

In July, the new sales orders index rose for a second consecutive month. The reported improvement in demand likely contributed to the rise in business activity. As a result, both indices rose well above the neutral 50-point mark. The purchasing inventories index also edged back above the neutral level to reach 50.9 points after averaging 42.5 points in the preceding three months.

It is not clear what the catalyst for these notable increases was. It may be that a number of manufacturing firms in - or supplying to - sectors that are busy with wage negotiations (automotive and platinum mining, for example) increased output, or saw increased demand for their products, in July to guard against possible strike-related production disruptions. Should this be the case, the notable upward moves in July are unlikely to be repeated.

Unfortunately, job prospects remained bleak, with the employment index only ticking up to 43.1 index points, thus remaining in deep negative terrain.

The index tracking purchasing prices erased most of last month’s gain and fell back to 67.9 index points in July. Apart from May’s reading of 67.7 points, this is the lowest level since May 2018.

The stronger rand exchange rate (on average) may have supported the decline in the index. 

www.absa.co.za