Unexpected Uptick In PMI For May 2020 Is Refreshing, Says SEIFSA

Johannesburg, 1 June 2020 – A surprise uptick in overall business activity for May 2020, as captured by the headline Purchasing Managers’ Index (PMI), despite subdued economic activity from the lockdown, bodes well for companies in the manufacturing sector, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.

Speaking after the release of the PMI data this morning, SEIFSA Economist Marique Kruger said the rebound of the PMI into an expansionary zone in May, despite a very difficult economic environment, provides insight to the eagerness of local purchasing executives to get back to work and restart production processes.

“Given the difficult economic context, businesses have to remain resilient and rejig local supply chains. The performance of the PMI is, therefore, encouraging as the lead indicator plays a vital role in influencing how producers and relevant stakeholders in the broader manufacturing sector view the month ahead,” Ms Kruger said.

The latest seasonally-adjusted preliminary PMI data show the composite PMI increasing from the contractionary zone of 46.1 points in April 2020, to the expansionary zone of 50.2 points in May 2020.

Ms Kruger said the positive performance is particularly welcome as most of the sub-indices performed better in May 2020 compared to April 2020.

It is important for businesses to progressively improve on economic activity in order to ensure their survival and maintain existing jobs. Accordingly, Ms Kruger said SEIFSA welcomes South Africa’s move into alert Level 3 from today, which will see a steady increase in the number of workers going back to work. This is important, especially given that all manufacturing, mining and construction workers are allowed to return under strict health protocols.

However, the concern is that many workers in the outlined industrial sectors are reliant on public transport for their daily commute to work, thereby increasing their exposure to the coronavirus, with extended implications for their health, their ability to work and productivity.

Ms Kruger said that in order to further limit unwanted consequences arising from the COVID-19 pandemic, it is important for policy makers discuss the implementation of transport subsidies for struggling businesses, which desperately need their full staff compliment to produce and sell. Such incentives would invariably contribute towards improved competitiveness and increased business activity, thereby bringing some level of normality to local manufacturing businesses in the short to medium term.

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