Johannesburg, 4 April 2018 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) notes with concern that the Absa Purchasing Managers’ Index (PMI) released today indicates that the data is still unresponsive to a slowly improving business and investor confidence.
SEIFSA Economist Marique Kruger said the Federation is disappointed with the data as the expectation was for a continuous improvement in the composite PMI index in the forthcoming periods, thereby replicating last year’s encouraging performance from July 2017 to November 2017, before rebounding in December 2017.
“The latest seasonally-adjusted preliminary PMI data shows that the composite PMI dropped back to below 50. The data shows the lead indicator reducing from the 50.8 recorded in February 2018 to 46.9 in March 2018, highlighting its variability to businesses. The volatility is a cause for concern, especially given the poor performance of both the business activity and new sales orders sub-indices, which decreased significantly,” Ms Kruger said.
She said the performance of the lead indicators highlighted the inability of businesses to secure more new deals against the backdrop of an improving domestic demand and easing political tensions, complemented by the latest pronouncements by Moody Investors Services. She said Moody’s unexpected upgrade of the outlook on South Africa’s rating to stable from negative, and its decision to keep its investment-grade rating on SA augurs well for the economy.
However, Ms Kruger said it appeared that businesses were still playing catch up, judging by the performance of the lead indicator, which acts as a gauge for the month ahead.
Ms Kruger said SEIFSA expects the data to climb back above the 50-neutral level in April 2018, as the lag effect of businesses taking advantage of an improving socio-political and economic climate starts trickling in.
“Also, given the current economic environment, business can plan production processes ahead with some degree of certainty, without having to worry much about rising domestic costs of doing business,” she said.
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