December 5, 2022
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose firmly back into expansionary terrain in November. The index rose to 52.6 points, up from 50 in October and an average level of 49.6 recorded in the third quarter. On its own, this suggests that the manufacturing sector could book another slight expansion in the fourth quarter. However, next week’s official data on factory production in October – and the extent to which this was impacted by the prolonged strike at Transnet – will help to firm up this view.
Encouragingly, both business activity and new sales orders improved for a second straight month after both had plunged lower during the load-shedding-heavy month of September. New sales order volumes expanded for the first time since May 2022. Even though it improved, the activity index remained stuck just below 50 points, while the employment index also lingered at a much lower level. As cautioned in the past, higher demand and output levels would likely need to be sustained for some time for any improvement in staffing levels to occur. Encouragingly, purchasing managers turned more upbeat about business conditions going forward. The index tracking expected business conditions in six months’ time rose to 51.7 from 49.2 in October.
The purchasing price index remained largely unchanged in November. This would correspond to price pressure at the start of the production process remaining elevated, but less intense than at the beginning of the year. The recent decline in the Brent crude oil price as well as a somewhat stronger rand exchange rate (against the US dollar) bode well for the general downward trend to continue through the final month of the year. Still, with load-shedding expected to continue, the (more) frequent usage of diesel-powered generators adds to the cost burden of producers.
Please note: December 2022 PMI will be released on 6 January 2023.
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