Johannesburg, 1 April 2019 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is extremely concerned about the consistent decline in the Absa Purchasing Managers Index (PMI), Economist Marique Kruger said this morning.
The seasonally-adjusted PMI declined from 46.2 points in February 2019 to 45.0 points in March 2019, meaning that manufacturing sector prospects are slightly worse now than they were in February 2019. It is for the third consecutive month in 2019 that the headline PMI has been trending below the 50-neutral level, which separates expansion from contraction.
Ms Kruger said this rate of contraction since the beginning of the year is worrisome.
Speaking after the release of the index, Ms Kruger said the deterioration in the data was underpinned by sharp declines in the employment, inventories and business activity sub-indices, despite the promising performances from the supplier performance sub-index, which perched above the neutral 50-point mark in March 2019. She said the best performer was the supplier performance sub-index, which increased to 55.3 points in March 2019, while the worst performer was the employment sub-index, which registered 42.7 points.
Ms Kruger said generally the PMI signalled broadly no change in overall manufacturing operating conditions in the first quarter of 2019, as beleaguered businesses in the Metals and Engineering (M&E) cluster struggle to stay afloat due to increasing fuel prices and rising energy costs, which compound input costs.
“A challenging business environment makes it difficult for businesses to capitalise on the weaker rand and increase the volume of imported intermediary imports. Moreover, increasing fuel prices and input costs could impact negatively on businesses’ production and export volumes. There is a need for more sub-indices to trend above the contractionary terrain,” Ms Kruger concluded.