JOHANNESBURG, 1 OCTOBER 2020 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) today welcomes the continuous rise in overall business activity for September, as proxied by the composite Absa Purchasing Managers’ Index (PMI), with the data providing a positive outlook to companies in the Metals and Engineering (M&E) sector.
The latest seasonally-adjusted preliminary PMI data shows the composite index remaining above the benchmark level of 50, recording 58.3 index points in September 2020 from 57.3 points in August.
SEIFSA Chief Economist Michael Ade said the trend offered hope and modified expectations for broader manufacturing and could be seen as a preview to enhanced industrial activity. He said it was encouraging that the majority of the sub-indices had performed well in September when compared to August.
A total of four sub-indices are trending comfortably above the neutral level of 50 points. The best performing sub-index in September was the new sales orders index, from 71.1 points in August 2020 to 70.5 points in September, while the employment sub-index was disappointing by trending in the contractionary zone, with 44.5 index points in September.
Dr. Ade said the continued robust performance of the headline PMI was consistent with the recent rise in the Producer Price Index (PPI), which should enable companies to increase selling prices against the backdrop of firming business activity.
“There is a need for continuous improvement in business activity, given the challenging operating business environment, amid prevailing low levels of domestic demand and increasing input costs, as a result of a generally weak exchange rate. This is important as the extended benefits will include an increase in employment in the various sub-components of the M&E industry,” Dr. Ade said.
He added that he was hopeful that businesses in the industry would take advantage of the volatile exchange rate and the subsequent move to lockdown alert level 1 to strategise and boost exports and overall trade, with extended benefits to the broader manufacturing sector.