PMI continues downward trend

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January 8, 2020

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) edged lower to 47.1 index points in December 2019 from 47.7 points recorded in November. The December figure is about one point below the average recorded through 2019. In any case, the PMI paints a bleak picture of the performance of the manufacturing sector through the year as the headline PMI only managed to edge above 50 points for two months in 2019. Bouts of load shedding and persistent weak domestic demand, coupled with more intense headwinds, from the global economy likely weighed on activity during the year.

In December, two of the major subcomponents registered fairly large declines. The new sales orders index slumped to record the lowest level seen in 2019. Part of this may stem from weaker external demand as respondents noted a drop in exports for a second consecutive month. Driven by the drop in demand, business activity also fell in December. Activity was further hampered by the return of load shedding during the month, with some respondents specifically flagging electricity disruptions as the reason for lost production time.

These declines were, to some extent, countered by smaller improvements in the three other subcomponents: employment, inventories and supplier deliveries. However, of these three, only supplier deliveries came in above 50 points with the others still pointing to a worsening of conditions.

The index tracking expected business conditions in six months’ time declined again in December after a slight improvement in November. The index fell to 45.9 from 47.4 in November. This is in stark contrast to the start of 2019, when the index was at a lofty 67.2 points. The return of load shedding likely soured expectations in December, while some may be concerned that export demand could continue to falter in the first half of 2020.

The purchasing price index rose in December to reach 65.8 index points, from 63.3 in the month before. Despite the increase, the index remains fairly low after sharp declines in October and November.