Manufacturing conditions deteriorated a little in December with business activity and unemployment under particular pressure as SA grappled with its fourth wave of Covid-19.
The latest Absa Purchasing Managers’ Index (PMI) — a monthly gauge of sentiment in the manufacturing sector and an early indicator of underlying economic activity, fell to 3.1 points to 54.1 month on month in December, with all subcomponents, excluding inventories, trending lower.
The PMI is based on a survey of respondents in the manufacturing sector conducted by the Bureau for Economic Research (BER), which covers activity such as new sales orders, expected business conditions and supplier deliveries. A reading above 50 points indicates expansion in the sector, while anything below 50 points indicates a contraction.
The business activity index lost five points to 48.7 points, with the report noting that the index was seasonally adjusted, therefore the decline in December may have more to do with disruptions caused by the sharp and sudden rise in domestic Covid-19 infections.
November’s move above the key 50 level for the employment index proved to be short lived as the index recorded a significant decline in December 2021, falling 8.2 points to 42.4 points.
The index measuring expected business conditions declined for the third month in a row, falling 3.7 points to 53.1, but remained in expansionary territory.
“The latest Absa PMI data shows that manufacturing activity weakened at year-end amid the Omicron wave, even as the government opted for light-touch lockdown restrictions,” Absa economist Miyelani Maluleke said in a note.
The fall in the employment index seems extreme and some normalisation in coming surveys should be expected, but it is worth noting that manufacturing jobs have continued to shrink in the first three quarters of 2021 even as underlying activity has improved from the depths of the hard lockdowns in 2020, Maluleke said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.