Although the composite Purchasing Managers’ Index (PMI) continued to trend in the expansionary zone, important sub-indices did not live up to expectation, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
SEIFSA Economist Marique Kruger said a dip in four out of the five sub-indices of the composite indicator does not bode well for companies in the diverse Metals and Engineering (M&E) cluster of industries, as it reflects a decrease in confidence from domestic business executives.
The performance of the PMI as the lead indicator plays a vital role in influencing how producers and relevant stakeholders in the broader manufacturing sector view the month ahead. The latest seasonally adjusted preliminary PMI data shows the composite PMI slowing from 53.9 points in June 2020, to 51.2 points in July 2020. However, it remains within the expansionary zone.
Ms Kruger said the slowdown in the composite PMI in July indicates decreased confidence by purchasing executives, who are less positive about manufacturing activity in the coming month.
“However, given the challenging economic environment, companies have to remain positive and think of innovative ways of ensuring their sustainability amid reduced spending by businesses. These may include companies broadly embracing digitisation, in line with the new normal, which can be used to place new orders and purchase stock. In addition to this, companies should embrace other cost-cutting measures like webinars and online training as a means of stabilising cash flows,” said Ms Kruger.
She said it is important for businesses to be able to register positive busiiness activities such as production/manufacturing, inventory/stock turnover, as well as delivery of raw materials and new orders in order to ensure their survival and maintain existing jobs against the backdrop of subdued economic activity.
Ms Kruger recommended that, in order to further limit unwanted consequences arising from the COVID-19 pandemic, company leaders should to review their cashflows and explore sustainable ways of reducing operational costs and the costs of sales in order to improve the bottom line and profit levels. Correspondingly, businesses should continue seeking ways to boost sales and stay relevant to the various target markets, she said.
“Such interventions will invariably contribute towards improved competitiveness and increased business activity, thereby bringing some level of normality to local M&E businesses during this period of the pandemic-induced economic crisis,” Ms Kruger said.