The Absa Purchasing Managers’ Index (PMI) rose by 2.8 index points to 48.2 in November. This was the first increase following two months of a decline in the headline index, although the index failed to return to positive terrain. Indeed, the business activity and new sales orders indices both still point to declining activity and demand, albeit at a slower rate than before.
The business activity index rose by 5.7 points to 46, while new sales orders booked an even bigger 6.9-point
increase in November to 46.6 points. While these solid improvements are encouraging developments and point to some recovery in underlying demand filtering through to better activity, there are some worrying signs in the survey results. These 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. Following a significant 12.2-point decline in October, the index lost a further 2.4 points to reach 41 in November. This means that purchasing managers expect business conditions to deteriorate in six months. Beyond issues with logistics, the recent ramp-up in the intensity of load-shedding, following some weeks of respite, may also have depressed forward-looking sentiment.
There was some good news on the cost front. The purchasing price index continued its downward trend and eased to 61.5 index points in November. This is the lowest level since early 2018 and suggests that after a brief reacceleration in price pressure earlier this year amid a sharply weaker rand exchange rate, the moderation continued through the second half of the year.