The seasonally adjusted Absa Purchasing Managers’ Index (PMI) came in at 53.0 index points in January 2023 – virtually unchanged from 53.1 in December. A decline in the employment and new sales orders indices to levels below 50 were offset by higher activity and inventories returning to positive terrain. Most encouraging was the significant, and surprising, improvement in the business activity index relative to the previous month. This was despite many respondents still flagging load-shedding as holding back production and new sales orders dipping lower in January. Should this translate into actual production growth, it would be a promising start to the year for the struggling sector.
Continued activity growth would require a sustained improvement in demand and most likely a move to less intense stages of load-shedding. In this regard, the increase in the expected business conditions index was encouraging. The index tracking expected business conditions in six months’ time rose by 8.9 points to 63.8 – the best level since early 2022. Given the poor potential for the domestic economy to accelerate demand growth for factory goods, this was likely driven by better expectations for the global economy. There are more signs of the European economy avoiding a near-term recession and the reopening of the Chinese economy providing a further boost to global demand.
Following a steady decline, the purchasing price index booked its biggest increase since March 2022. That
said, the index remains low relative to its long-term average – meaning cost pressure remains less intense
compared to most of 2022. The uptick in costs could possibly be linked to measures to offset the impact of
load-shedding on production.
