Manufacturing output in SA pointed to a renewed expansion in the country’s private sector for the second successive month in February, indicative of a marginal improvement in operating conditions across the private sector.
S&P Global’s IHS Markit SA purchasing managers index (PMI) released on Thursday remained the same from the previous month. The index tracks business trends across private sector activity, including mining, manufacturing, services, construction and retail based on data collected from a representative panel of about 400 companies on their views on the outlook for future activity.
The index remained at 50.9. A reading above 50 indicates expansion in business activity and one below 50 shows that business activity is generally declining.
This latest PMI survey indicated an expansion in overall activity and new business across the private sector.
While the firms were hopeful that the effects of the pandemic would ease over 2022, the index remains marginally above the expansion cut-off, reflecting that the recovery will be slow in an economy that’s losing steam. Towards the end of 2021 it was pushed into negative territory as the emergence of the Omicron variant of Covid-19 led to SA being cut off from big markets.
Of the five sub-components of the index, output, new orders and suppliers’ delivery times had a positive influence, while employment, as well as inventories and prices posted negative.
IHS Markit said the country’s output index, albeit signalling a marginal improvement in activity, returned to growth territory for the first time in February since November 2021.
Survey respondents said the uplift was mainly linked to a recovery in new business and that upturns were largely seen on the domestic side as orders from foreign clients decreased for the ninth month running.
Sales, or the rate of new order growth, also saw a strong uptake, recording the strongest rise since May 2021. This was despite being muted by export weakness and supply side challenges, IHS Markit said.
Even though the suppliers’ delivery times index posted a positive movement, it faced challenges. IHS Markit said SA firms continued to be held back by supply shortages and shipping delays, sharply lengthening average lead times. But, in comparison to the past five months, February delays were at the slowest pace since last September. Consequently, there was a renewed drop in firms’ inventories of inputs, which led businesses to increase their purchasing activity for the first time since last June.
Negative IHS Markit PMI posting came from the employment index, as well as the inventories and prices index.
IHS Markit explained that the downturn from the Omicron wave had a lasting impact on staffing as employment levels fell for the third month straight.
David Owen, economist at IHS Markit, said the consecutive cuts in employment was a result of firms’ recent drop-offs in new orders that led to reduced workloads.
“Cost pressures also remained severe, which led firms to mark up their output charges to the greatest extent for nine months.
“Cost inflation remained strong in February as businesses cited increases in the price of fuel, raw materials and freight, as well as a solid rise in payroll expenses,” said Owen.
He added that with many firms passing these costs on to their customers, output charges rose at the sharpest rate since last May.
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.