Purchasing Managers’ Index (PMI) ) fell sharply to 48.8 index points in February from 53.0 in January

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) declined dramatically from 53.0 in January to 48.8 in February. The headline indicator went below the neutral 50-point level for the first time since September 2022, indicating a significant deterioration in industrial business conditions. Furthermore, both the business activity and new sales orders indices were in contractionary territory, with demand falling for the second month in a row.

According to Absa, the February survey period included an unprecedented seven consecutive days of stage 6 load-shedding, which was likely top of mind for many respondents. To be sure, load-shedding once again featured frequently in the commentary where respondents explained why activity declined relative to the previous month. A glimmer of good news was that export sales rose to the best level in a year, implying that producers supplying solely to the domestic market likely had a tough month. In line with a weaker output picture, the employment and inventories indices also came in below the neutral 50-point mark.

Further negative news came in the shape of a substantial drop in the index gauging projected business conditions in six months. In February, the index plummeted to 46.8 points, its lowest level since May 2020. This indicates that respondents have not been as pessimistic about future conditions since the country began to emerge from the most restrictive period of the COVID-lockdown.

Additionally, the buying price index increased for the second month in a row, reaching its highest level since September 2022. The poll was conducted while the rand was quite weak (against the US dollar), trading mostly over R18/$. This would have impacted the prices of imported raw materials and intermediary goods in particular. The increase in the PMI’s price index signals that factory-gate prices may resume their upward trend. Yet, the index is still significantly below its top, which was set in the early months of 2022.