The Absa purchasing managers’ index (PMI) will come under the spotlight on Monday, providing a snapshot of the health of the energy-intensive manufacturing sector.
Manufacturing is a R513bn sector in real gross value-added terms and comprised 11.2% of the economy in the first quarter of 2023, down from 15% in 1995.
The Absa PMI, which is compiled by the Stellenbosch-based Bureau for Economic Research (BER), improved to 49.7 index points in August, from 47.3 points in July. But it remained below the 50-point neutral mark for the seventh consecutive month, pointing to continued contraction in the sector, which is still labouring under the effects of load-shedding and a constrained logistics network.
Absa economist Sello Sekele said the sector was pushed up “artificially” in August by the unusually long supplier delivery times index, pointing to the effects that the weeklong taxi stayaway in Cape Town had on the sector.
“Similar to the July data, when supplier delivery times lengthened as a result of truck vandalism on the N2 and N3 transport corridors in that month, supply chain disruptions caused the index to remain high in August, rising by 2.9 points to 61.9 — reflecting the effects of the weeklong taxi strike in Cape Town,” Sekele said.
He said that before the pandemic, longer supplier delivery times were typically associated with higher demand conditions in the manufacturing sector. But more recently, increasingly frequent supply chain disruptions have been evident in this subindex.
The S&P Global economywide PMI will be published on Wednesday. The index increased to 51 in August, pointing to the first expansion in private sector activity in six months and the biggest in a year, compared with 48.2 in July.
Business activity grew for the first time in a year as demand conditions stabilised, helping firms to boost output. But high inflation and load-shedding remained obstacles to growth.
S&P Global Market Intelligence economist David Owen said the recovery in output encouraged businesses to increase their staffing and purchasing to the greatest degree since 2022, despite sharp increases in both material prices and salaries.
“Generally, firms cited hopes of a pickup in demand conditions as well as a cooling of inflationary pressures and reduced disruption to operations from load-shedding,” Owen said.
On Thursday, Reserve Bank governor Lesetja Kganyago will speak at the PSG Think Big webinar series and will provide insight into the economy, the impact of monetary policy and the opportunity that exists within it. This will be an open forum at which the public can ask questions in real time via a digital stream.
At its last monetary policy committee meeting, the Bank left borrowing costs unchanged for a second consecutive meeting but struck a cautious tone amid persistent upside risks to the inflation outlook and a decline in fiscal sustainability, which continues to drive the country’s risk premium.
Also on Thursday, data on electricity generated and available for distribution for August will be published by Stats SA.
Electricity production fell 3.4% year on year in July, marking 22 consecutive months of annual contraction. The decline in July was shallower than the 7.3% annual contraction recorded in the first half of the year.
Seasonally adjusted electricity production reflected a weak start to the third quarter, falling 2.4% month on month in July after a monthly expansion of 4.2% in June.
FNB chief economist Mamello Matikinca-Ngwenya said the continued decline in electricity production underscores a reduction in Eskom’s energy availability factor, which is at about 54.4% in the year to date — lower than 63.2% and 59.6% recorded over the corresponding period in 2021 and 2022, respectively.
Matikinca-Ngwenya said electricity consumption also weakened further at the start of the third quarter, falling by 3.1% on an annual basis. So far in 2023, electricity consumption is down 6.1% from the same period in 2022 and is now 52.5% of the electricity consumed in the same period in 2019, she said.
Foreign exchange reserves data for September will be published by the Reserve Bank on Friday. SA’s gross foreign exchange reserves fell to $62bn in August from $62.2bn in July.
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.