8 December 2019
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) ticked down to 47.7 index points in November from 48.1 in October. The decline was broad-based as four of the five subcomponents of the headline PMI nudged down when compared with the previous month. Despite the decline, the average level of the PMI in October and November is still slightly above that recorded in the third quarter.
Worryingly, business activity slumped further in November. The index fell by 6.2 points to a multi-year low of 39.4 in November. According to Stats SA, quarterly manufacturing production contracted in the third quarter of 2019. The weak readings on the business activity index seen in the fourth quarter so far argue against a strong, if any, recovery in manufacturing output.
Demand remained under pressure with the new sales orders index not being able to hold on to all of last month’s gains. Respondents saw a decline in export demand during the month. The only major subcomponent to record an improvement compared to the previous month was purchasing inventories, which picked up from a ten-year low reached in October.
Notwithstanding the increase, the index remained well below the neutral 50-point mark. The only subcomponent to come in above 50, which generally points to improving conditions, was the supplier deliveries index.
On a more positive note, respondents turned slightly less pessimistic about the near-term future. The index tracking expected business conditions in six months’ time increased to 47.4 index points in November after recording five consecutive declines. Nonetheless, despite the uptick, the latest reading means that conditions are still expected to worsen in six months’ time, albeit less so than before.
Finally, the purchasing price index fell by a further 5.7 points after a 7.7-point decline was recorded last month. The sharp declines point to a significant moderation in cost increases. Indeed, the index fell to the lowest level since early 2018.