Mon, 17 May 2021

  • Following three consecutive months of improvement, the seasonally adjusted Absa Purchasing Managers' Index declined slightly in April.
  • The Absa PMI declined slightly to 56.2 index points in April from 57.4 in March.
  • It is likely that production was negatively impacted by load shedding during the month, says an economist.

The manufacturing sector in South Africa grew at a slightly lower pace in April than in March, according to the latest Absa Purchasing Managers' Index (PMI) released on Monday.

Following three consecutive months of improvement, the seasonally adjusted Absa PMI declined slightly to 56.2 index points in April from 57.4 in March. Despite the modest pullback, the index is now about 2.5 points above the average recorded in the first quarter of the year and about 26 points above the April 2020 reading recorded during the strictest phase of South Africa's lockdown.

The index is compiled by the Bureau for Economic Research (BER) at Stellenbosch University. A value of 50 indicates no change in activity, while a value above 50 indicates increased activity and a value below 50 indicates decreased activity. The April result is, therefore, still above neutral.

According to Investec economist Kamilla Kaplan, it is likely that production was negatively impacted by load shedding during the month as well as by supply constraints.

She further points out that business expectations saw a strong improvement in April, to a three-year high.

"Confidence was likely boosted by positive prospects for sales and activity based on the global economic recovery. This may have been a contributor to efforts to expand capacity and thereby the improved employment conditions," she explains.

She further points out that in April, there was a sizeable 5.3 index point decline in the output sub-index to 50.8. For her, this indicates a very modest rate of expansion in production.

"However, new orders remained close to the elevated levels recorded in March. The expansion in new orders books was ascribed to international sources, with new export orders in particular gaining further traction," Kaplan said in a statement.

"The supply chain issues in turn contributed to keeping the price gauge near its five-year highs, reflecting accelerated input cost inflation for producers. The fuel price hikes in April were also identified as a contributing factor."

Source: News24

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