Johannesburg, 1 August 2019 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the rise in overall business activity in the broader manufacturing sector, as reflected by the composite Absa Purchasing Managers’ Index (PMI) released this morning.
Speaking after the release of the data, SEIFSA Economist Marique Kruger said the Index provides a promising, forward-looking insight into the activities of the manufacturing sector, although the volatility in the data encapsulates the stress level confronting local businesses since December 2018.
As a lead indicator, the PMI and its five sub-indices play a crucial role in the decision-making processes of key stakeholders and captains of industry. The latest seasonally-adjusted data captured the headline PMI rising above 46.2 points in June 2019 to 52.1 points in July 2019, trending well above 50 points, which separates expansion from contraction.
The improvement in the headline PMI was underpinned by increases in the business activity, new sales orders, inventories and employment sub-indices in July 2019 when compared to June 2019.
Further analysis of the data shows that the business activity sub-index was the best performing index, increasing from 44.5 points in June 2019 to 56.9 points in July 2019, while the worst performer was the supplier performance sub-index, which registered 51.9 points, down from 56.9 points in June 2019. Ms Kruger said the improvement in the composite PMI was well supported by the underlying sub-components.
“Given that the composite PMI trend remains volatile and has generally trended below the benchmark level of 50 since the start of the year, the current trend is worrisome, since the poor performance has persisted more than halfway through 2019,” said Ms Kruger.
Ms Kruger said the volatility in the PMI trend, underpinned by fluctuating input costs, galloping petrol prices, increasing electricity costs and a generally weaker exchange rate, continues to mirror the difficult operating environment for local producers in the metals and engineering cluster and the plethora of challenges generally faced by manufacturing companies.
“It is very important that there is a continuous rebound in the PMI, in order to boost business confidence and expectations in the medium to long term,” she concluded.