Absa’s seasonally adjusted purchasing managers’ index (PMI) returned to contractionary territory in November, dropping to 48.1 points from the previous month’s 52.6.
The data signalled a renewed contraction in SA’s manufacturing activity, with both the business activity and new order indices declining below the neutral 50-point level after recording expansions through September and October.
“This points to some loss of momentum in the recovery seen over the past two months,” said the Bureau for Economic Research (BER), “however, the PMI has been volatile this year, so this is not unexpected.”
The business activity index decreased by 6.6 points to 49 points, while the new sales order index dropped to 45.9 points from 54.8 in October, in line with the decline in business activity.
The BER said that despite local consumers enjoying some windfalls, such as lower inflation and interest rate cuts, domestic demand was still under pressure according to some respondents.
“The global political outlook has become more complicated with concerns about global growth and trade dynamics following the election of Donald Trump as US president earlier in November,” it said.
Added to this was an uptick in purchasing prices, driven primarily by rising fuel prices, which increased in November after a series of cuts. The purchasing prices index rose to 61.7 points, having recorded its lowest reading since early 2018, in October.
The employment index also decreased slightly to 46.9, remaining in contractionary territory after recording 49.4 points in October.
“A notable, sustainable lift in economic growth is essential to drive job creation,” said Investec economist Lara Hodes, with modest growth of 1% and 1.7% expected for this year and next year, respectively.
Some encouragement came from an increase in export sales, reflecting improved global demand from previous months being sustained despite subdued manufacturing conditions in a number of key regions.
“The HCOB Eurozone Manufacturing PMI fell further into depressed territory in November,” said Hodes, signalling a sharper deterioration in manufacturing conditions for the region.
Despite November’s PMI reading signalling a renewed contraction, the index for anticipated business conditions was largely unchanged at 62.3, from 63.7 in the previous month — “indicating that manufacturers remain positive about business conditions going forward,” said the BER.
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