Pessimism Amongst Business Executives Deepens As PMI Data Remains In The Contractionary Zone

Johannesburg, 2 November 2019 – Local industries continue to painstakingly navigate murky waters, characterised by poor business confidence and low business expectations in recent times, as particularly reflected by the nondescript performance of the Absa Purchasing Managers’ Index (PMI) released today for November 2019, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said this morning.

The seasonally-adjusted composite Absa PMI dipped to 47.7 index points in November 2019, down from 48.1 index points in October 2019. The November level was lower than the average of 48.47 during the second quarter, but slightly higher than the average of 47.27 recorded during the third quarter.

Worryingly, the level was also lower than the average of 48.31 points recorded during the first 10 months of the year. Out of the five PMI sub-indices, four performed poorly in November 2019 when compared to the previous month. The business activity sub-index performed the worst, declining to 39.4 in November 2019 from 45.6 in October; while the inventory sub-index was the only to nudge up in November.

Speaking after the release of the data, SEIFSA Economist Marique Kruger said the main PMI data doggedly places overall business activity in the contractionary zone for the fourth consecutive time since July 2019 and generally for the ninth time since the beginning of the year 2019, succinctly capturing a difficult year for local businesses in the broader manufacturing sector, including the diverse metals and engineering (M&E) industry.

“The data, which is a good barometer of the health of the manufacturing sector, is also reflective of prevailing perception amongst business executives of the low possibility of a turnaround in fortunes as we approach the year end. This is especially so given that the poor performance of the PMI seems to continue unabated, thus leaving little doubt as to what will be expected in the few months after the festive break,” Ms Kruger said.

She said weak business activity, low margins and profit levels, including increasing costs, are disconcerting and do not bode well for medium to long term planning.

“The challenging environment, therefore, highlights the need to urgently assist local companies in directly reducing the prices of intermediate inputs, towards enhanced competitiveness. The initiative will also strengthen business confidence and expectations, towards creating and maintaining jobs in the entire M&E value chain and the broader manufacturing sector,” Ms Kruger said.

SEIFSA is a National Federation representing 21 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people

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