Latest news with #AbsaPurchasingManagers'Index
IOL News
3 days ago
- Business
- IOL News
South Africa's economy stagnates with mere 0. 1% GDP growth in Q1, raising concerns
South Africa's economy narrowly escaped contraction in quarter one 2025, with gross domestic product (GDP) growing by a mere 0.1%, down from 0.4% in quarter four 2024, according to Statistics SA/ South Africa's economy narrowly escaped contraction in quarter one 2025, with gross domestic product (GDP) growing by a mere 0.1%, down from 0.4% in quarter four 2024, according to Statistics SA Experts were united in their concerned about stagnation in the economy. Maarten Ackerman, the chief Economist and Advisory Partner at Citadel, said the figures are "not something to celebrate,' as the country remains in a prolonged per capita recession, with full-year growth at just 0.8%. Agriculture, forestry and fishing industry increased by 15.8%, contributing 0.4 of a percentage point to the positive GDP growth. This was primarily due to increased economic activities reported for horticulture and animal products. The transport, storage and communication industry increased by 2.4%, contributing 0.2 of a percentage point. Increased economic activities were reported for land transport, air transport and transport support services. Stats SA said the finance, real estate and business services industry increased by 0.2%, contributing 0.1 of a percentage point. Increased economic activities were reported for retail trade, motor trade, accommodation and food and beverages. The manufacturing industry decreased by 2.0%, contributing -0.2 of a percentage point. Seven of the ten manufacturing divisions reported negative growth rates. The largest negative contributions were reported for the petroleum, chemical products, rubber and plastic products; food and beverages; and motor vehicles, parts and accessories and other transport equipment divisions. Mark Phillips, the head of Portfolio Management and Analytics at PPS Investments, warns that despite agriculture's impressive 15.8% surge, the economy is showing signs of serious strain. Manufacturing is down. Mining is struggling. Fixed investment has dropped. He said, big questions now loom: Is this a fragile win or a warning sign? How much longer can South Africa keep the lights on – economically and literally? This as global risks are intensifying, domestic investment is weakening, and the economy remains vulnerable to another round of load-shedding or global demand shocks. Professor Raymond Parsons, NWU Business School economist, said the disappointing GDP growth figure of 0.1% for the first quarter of 2025 comes as no surprise. 'Although adverse global developments earlier this year have also played a role, the weaker economic data was already apparent before then. For example, the Absa Purchasing Managers' Index for May, although showing some recent signs of business activity and demand improvement, has remained in contractionary territory for seven consecutive months.' Parsons said the key manufacturing sector is likely to continue to be a lagging one for now. 'This reality was already recently also presaged by several reduced growth forecasts for 2025, including by the National Treasury (1.9% to 1.4%) and the SARB (SA Reserve Bank)(1.7% to 1.2%). If present trends persist, the growth outlook for this year now seems likely to be only about 1%, possibly rising to about 1.5% in 2026. It is clear that the incipient economic recovery in SA is presently struggling to gain momentum and needs maximum support to strengthen the business cycle upturn," he said. Waldo Krugell, an economics professor at the North-West University (NWU), pointed to the fact economists were expecting weak GDP data as high frequency indicators like PMIs and monthly manufacturing and mining stats pointed to a slowdown. 'The fact that agriculture, which is a small part of GDP, is again such a swing factor, though to the positive side, shows that there is very little growth happening elsewhere. On the expenditure side it is households driving the little bit of growth that we see. They were spending on transport (those Q1 new vehicle sales showing up), food and beverages, restaurants and hotels, and health,' he said. Krugell added that what is really worrying is the contraction of investment spending. 'International uncertainty did play a role, but we did have exports contributing to growth in Q1. I think the loss of Government of National Unity (GNU) reform momentum played a bigger role.' Call for policy coordination Meanwhile, Dr Eliphas Ndou, an economist and author at Unisa's Department of Economics, said the weak economic growth rate points to an urgent need for policy coordination to raise economic growth. 'The weaker growth implies the economy will be creating jobs at a faster pace leading to persistently high unemployment rate, and also this means elevated gross loan debt to GDP ratio, which National Treasury should deal with through spending reductions. It is ideal that in such periods of elevated policy and trade uncertainty that slow economic growth to implement policies that raise economic agents' optimism,' Ndou said. Ndou added that the slowdown in consumption contributions from 0.7 in the last quarter of 2024 to 0.2 in the first quarter of 2025 is consistent with deterioration in FNB/BER consumer confidence index which declined from -6 index points to -20 index points over the same periods. Wandile Sihlobo, the chief economist at Agricultural Business Chamber of South Africa, highlighted that South Africa's agriculture sector is in recovery mode, although the recovery is uneven, as some subsectors, mainly livestock, are facing challenges that will become apparent later in the year. 'The data released this morning by Statistics South Africa shows that South Africa's agricultural gross value added expanded by 15.8% quarter-on-quarter (seasonally adjusted) in the first quarter of 2025. This expansion is primarily due to the improved performance of certain field crops and the horticulture subsectors,' he said. Sihlobo added that the better performance of these particular subsectors is expected to continue dominating the year. BUSINESS REPORT
IOL News
3 days ago
- Business
- IOL News
SA's manufacturing activity firmly in contractionary territory in May
The Absa Purchasing Managers' Index (PMI) released on Monday indicated that the seasonally adjusted PMI decreased by 1.6 points to 43.1 in May 2025. Image: Supplied The Absa Purchasing Managers' Index (PMI) released on Monday indicated that the seasonally adjusted PMI decreased by 1.6 points to 43.1 in May 2025. Absa said that the PMI remained in contractionary territory for a seventh consecutive month. The PMI suggests that the manufacturing sector continued to suffer in May, despite some flickers of activity and demand improvement, albeit at extremely low levels. 'However, a decline in the supplier deliveries index pushed the headline PMI lower. The business activity index indicated some improvement, increasing by 3.4 points to 43.4 in May. New sales orders also increased, by 2.2 points to 38.3 in May. This was likely due to domestic demand recovering slightly as export sales continued to deteriorate at a rapid rate.' Absa said the supplier deliveries index has been tricky to interpret since the Covid-19 pandemic. 'Across the globe, the traditional signal of an increase being positive (with the index being inverted, so slower deliveries are seen as a positive sign as they are caused by increased demand for supplies) was no longer valid, as supply-chain bottlenecks and delays, and not higher demand, caused slower deliveries.' The purchasing price index decreased by 7.9 points to 60.4 in May due to fuel price cuts at the start of the month. 'A lower Brent crude oil price and a stronger rand, despite the fuel levy increase, bode well for further fuel price declines at the start of this month.' Absa added that the index tracking expected business conditions in six months' time increased by a significant 13.9 points to 62.5 in May, the highest level since the end of 2024. 'Sentiment improved as global tariffs were suspended, and businesses showed faith that local political disagreements on policy within the government would be resolved.' Investec economist Lara Hodes said, "The slide in the index was partly underpinned by a decrease in the suppliers' delivery index, which fell from 56.6 to 49.0. According to the BER, the decline in the index (the index is inverted so a decline suggests faster deliveries) could technically mean that logistical constraints are easing.' Hodes added that the business activity and new sales orders' indices remained subdued, well below 50, but did pick up modestly in May, despite a continued weakening in export sales. 'Worryingly, the employment index fell further into contractionary territory in May with a reading of 40.0 (42.9 previously). It has been in negative territory for fourteen consecutive months. Hodes said addressing the country's unemployment crisis remains a key imperative of the government. 'However, to achieve this, we need a substantial lift in confidence, driving investment and accordingly economic growth. Purchasing prices declined notably in May by 7.9 points to 60.4, supported by a further cut in fuel prices. Favourably, the index measuring anticipated business conditions (in six months' time) moved back into expansionary territory, reaching the highest level since the end of 2024. It climbed 13.9 points to 62.5.' Dr Eliphas Ndou, an economist and author at Unisa's Department of Economics, said the latest Absa Purchasing Manager Index indicates the manufacturing sector is struggling and is susceptible to weak demand conditions, political and trade uncertainty, which has implications for economic growth and employment outlook in the country. 'The Absa PMI has a statistically strong and positive co-movement with economic growth and is a leading indicator of economic growth. This means an improvement in the indicator would signal an improvement in economic growth. Whilst a weakening in the Absa PMI signals a weakening in economic growth.' Professor Waldo Krugell, an economist at North-West University, said that the PMI is still in contractionary territory and this is worrying for the growth prospects of the economy. 'The expectations are that this week's quarter one growth figures are not going to look good, but the PMI has shown business struggling in April and May as well.' Professor Bonke Dumisa, an independent economic analyst said that he is not surprised about this negative Absa PMI. 'The buyers in most manufacturing companies are usually the most conservative in the business, believing it is safest to adopt a cautious approach and be accused of opportunity cost in case they run short of products. The global uncertainty created by Trump's tariffs, wars and other consequential impacts of his "Executive Orders" have resulted in most buyers becoming very pessimistic about the business conditions. BUSINESS REPORT
The Citizen
4 days ago
- Business
- The Citizen
Manufacturing PMI falls to lowest level since April 2020 — bad news for GDP
The outlook for economic growth in South Africa is not great, and the new PMI and GDP data is not expected to be great either. Manufacturing PMI fell to its lowest level since the pandemic in May, signalling that the manufacturing sector remains under pressure after a poor start to 2025. This is not good news for the GDP statistics for the first quarter that will be announced on Tuesday, 3 June. The Absa Purchasing Managers' Index (PMI) is an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) and sponsored by Absa. According to the BER, the seasonally adjusted PMI decreased by 1.6 points to 43.1 in May 2025 from 44.7 in April and 48.7 in March. Jee-A van der Linde, senior economist at Oxford Economics Africa, says the headline PMI remained in contractionary territory for a seventh consecutive month. 'This suggests that the manufacturing sector continued to suffer in May, despite some flickers of activity and demand improvement, albeit at extremely low levels. However, a decline in the supplier deliveries index pushed the headline PMI lower.' ALSO READ: Manufacturing PMI for April shows deteriorating SA economy Modest increase in business activity and sales orders The business activity and new sales orders indices rose modestly in May, likely driven by an uptick in domestic demand as export sales continued to deteriorate rapidly, he says. The survey findings were inconclusive on whether the decline in the inverted supplier deliveries index was due to easing logistical constraints or lower demand. Meanwhile, the employment index continued to decline, remaining in contractionary territory for 14 consecutive months. The index tracking expected business conditions in six months' time increased sharply to its highest level since the end of 2024. Van der Linde says the survey findings suggest that sentiment improved after global tariffs were suspended and businesses were hopeful that local political disagreements on policy within the government would be resolved. ALSO READ: PMI down slightly with concerns about global trade uncertainty How manufacturing slipped further in May This chart shows how manufacturing PMI slipped further in May, pressured by soft local and international demand: Source: BER ALSO READ: This is where we would be if SA sustained an economic growth rate of 4.5% PMI at lowest level since April 2020 Van der Linde says the headline PMI has fallen to its lowest level since April 2020, when it was 30.9, emphasising just how weak demand is for South African manufactured goods. 'The employment index has remained in contractionary territory for the past 14 months, as manufacturers continue to scale down production due to stagnant demand.' He says the manufacturing sector is expected to weigh on first-quarter real GDP growth, and that looks likely to be the case in the second quarter as well. 'First-quarter economic data releases have been weak, pointing to 0% growth in the first quarter of 2025 compared to the fourth quarter of 2024. A quarterly contraction cannot be ruled out. Our below-consensus real GDP growth forecast for 2025 remains at 1.0%.' This table shows the subcomponents of the Manufacturing PMI fared over the past three months: Source: BER
The Citizen
14-05-2025
- Business
- The Citizen
Economic activity slows in April as economy struggles
Although the South African economy is muddling along, there is some hope thanks to low inflation, low fuel prices and a strong rand. Economic activity has slowed in April as the economy struggles with downside risks, such as the United States' (US) punitive import tariffs, plummeting markets and sharply lower forecasts for global economic growth. According to the BankservAfrica Economic Transactions Index (BETI), that measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices, economic activity slipped in April. 'The BETI reached its lowest level of the year of 136.4 in April, down by 0.6% on the 137.2 recorded in March,' Shergeran Naidoo, BankservAfrica's head of stakeholder engagements, says. Although the BETI is still 1.5% higher than a year ago, the slowdown reflects the impact of April's announcement of U.S. punitive import tariffs, which marked the beginning of a developing trade war leading to daily volatility, plummeting markets and slashed global growth forecasts. Elize Kruger, an independent economist, says confidence levels across the globe and in South Africa have been knocked by the sheer uncertainty that these developments brought on. 'Low confidence and uncertainty are detrimental to economic activity, as investors and households hold back on spending decisions until there is more clarity.' ALSO READ: Economic activity in SA struggling to gain momentum Good news for local economy despite global setbacks However, despite global setbacks, positive factors are expected to support economic activity in 2025, she says. 'While the overall effect of global developments is negative for the South African economy, prompting a downward revision of 2025 growth forecasts by around 0.5 percentage points, several offsetting factors are offering some relief. 'The global downturn is expected to dampen commodity demand and prices, but lower international oil prices are easing inflation pressures, and rising gold prices may help counter export losses. Many South African export commodities also remain exempt from US tariffs, providing potential support for the mining sector and broader economy.' Kruger points out that other economic indicators were mixed in April, sending conflicting signals about the strength of the economy. The S&P Global South Africa Purchasing Managers' Index rose to 50.0 in April, increasing from 48.3 in March, after four months in negative territory. ALSO READ: SA's economic growth outlook growing increasingly dim Manufacturing is struggling, but car sales are recovering Meanwhile, the seasonally adjusted Absa Purchasing Managers' Index (PMI) remained in contractionary territory for a sixth consecutive month. Data from Statistics SA also recently confirmed that the manufacturing sector has entered a technical recession with two consecutive quarterly contractions. However, encouragingly, Naamsa figures revealed that the strong performance in the vehicle sales market continued in April 2025. 'All indicators point to the likelihood that, after several false starts, full-year vehicle sales in 2025 will finally return to pre-Covid levels, reflecting an improvement in household budgets due to lower inflation and interest rates,' Kruger says. ALSO READ: Increased unemployment rate red flag for weak economic growth Pockets of excellence in local economy will help economic activity 'With some pockets of excellence in the South African economy, such as in the renewable energy, automotive and financial sectors and positive developments relating to the de-escalation of the global trade war in recent days, such as the trade deals between the US and UK and China, the South African economy can regain momentum in the second half of the year.' Kruger says the launch of the second phase of Operation Vulindlela is also a positive development, confirming government's commitment to push forward on much-needed structural reforms. After reaching an all-time high in March, the number of transactions cleared through BankservAfrica in April 2025 subsided to 167.9 million compared to 172.4 million in March, but it was still 7% up on a year ago. The standardised nominal value of transactions eased off to R1.320 trillion in April compared to R1.365 trillion in March 2025, with the average value per transaction tracked in the BETI continuing on its downward trend to R7 482. ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert Structural tailwinds will push up economic activity Kruger says some structural tailwinds should continue to push economic activity higher on the local front in 2025 despite global developments. With inflation currently at 2.7%, below the South African Reserve Bank (Sarb) 3-6% target band, there is significant room to cut interest rates from the current repo rate level of 7.5% by at least 50 basis points. 'Real interest rates are simply unnecessarily punitive for an economy muddling along, unable to gain meaningful momentum,' she says. At 4.3%, the average real repo rate remains highly restrictive, especially when compared to the neutral level of 2.7%. Meanwhile, the rand has regained nearly all its post-US Liberation Day losses, helped by some weakness in the US dollar and is trading at fairly strong levels, Kruger says. 'The low inflation rate will also play a key role in supporting the recovery of salary earners' purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real salary increases, which should boost consumer spending.'
The Citizen
02-05-2025
- Business
- The Citizen
Manufacturing PMI for April shows deteriorating SA economy
The seasonally adjusted PMI remained in contractionary territory for a sixth consecutive month, which is bad news for GDP. The manufacturing PMI for April shows how the South African economy is deteriorating as it sinks deeper into contractionary territory, decreasing by 4 points to 44.7. The seasonally adjusted Absa Purchasing Managers' Index (PMI) is an economic activity index based on a survey conducted by the Bureau for Economic Research and sponsored by Absa among a representative group of purchasing managers in the South African manufacturing sector. These purchasing managers have to indicate each month whether a particular activity, such as new sales orders, for their companies increased, decreased or remained unchanged. A value of 50 indicates no change in the activity, a value above 50 indicates increased activity, and a value below 50 indicates decreased activity. The BER points out that the respondents' commentary was decidedly more negative in April, with some suggesting that demand was weak amid the uncertainty created by the global tariffs saga and local developments. Beyond the politics, excessive rains also caused problems for some producers. ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert PMI shows decrease in expected business conditions It is worrying that the index tracking expected business conditions in six months' time decreased further, the BER says. The index was down by 9.4 points to 48.6 in April, edging below 50 points for the first time since the 41 points recorded in November 2023. The BER says the return of load-shedding, global tariff developments and local political uncertainty due to the VAT saga in the budget and open disagreements within the government of national unity (GNU) likely weighed on sentiment. In response to struggling demand, the business activity index decreased significantly by 8.3 points to 40 in April, while new sales orders declined by 12.8 points to 36.1 points in April, with domestic demand and export sales decreasing. The index tracking export sales returned to contractionary levels. Meanwhile, despite weak demand, the supplier deliveries index increased by 2.5 points to 56.6 points. Since this index is inverted, the BER points out that this suggests that delivery times have lengthened and are slower. ALSO READ: Decrease in take-home pay reflection of mounting economic pressure Increased bottlenecks in logistics, even with low demand 'Given the slowdown in activity and fewer orders being processed, this suggests increased bottlenecks in the supply chain processes, causing delays that struggle to improve in a low-demand environment,' the BER says. The employment index decreased by 3.2 points to 42.9 and remained in contractionary territory for 13 consecutive months. Sluggish demand, uncertainty and competition from imports have caused production declines for local manufacturers, leading to staff layoffs to match current production levels, the BER says. However, the inventories index ticked up slightly to 47.8 in April from 45.9 in March, with some manufacturers reporting they were stocking up on materials amid uncertainty around tariffs. The purchasing price index increased by 3.8 points to 68.3 in April, despite fuel price cuts at the start of the month, while the cost of imported materials increased significantly in the first two weeks of April as the rand exchange rate weakened and remained above R19/$, although it has since strengthened to below R19/$. ALSO READ: PMI increases by four points, analysts say it is not enough PMI shows weak demand in uncertain global economic outlook Jee-A van der Linde, senior economist at Oxford Economics Africa, says demand for goods manufactured in South Africa remains weak, while an uncertain global economic outlook also constrains activity. 'Moreover, manufacturers have grown more despondent about future business conditions due to political uncertainty and as the impact of US trade tariffs sets in.' This graph shows how manufacturing PMI dropped in April as demand conditions deteriorated: Source: BER ALSO READ: Economic activity in SA struggling to gain momentum PMI's poor start to second quarter of 2025 not good news Van der Linde says the manufacturing sector appears to have recorded a poor start to the second quarter after averaging 46.2 in the first quarter of 2025, which was lower than the 49.0 reading in the fourth quarter of 2024. 'Considering South Africa's uncertain political environment, combined with the backdrop of building global headwinds, the outlook for the South African economy has deteriorated. Real gross domestic product (GDP) growth for 2025 has been revised down to 1.0% from 1.5% previously, due to expectations of reduced merchandise trade and lower private sector investment in the near term.' This table shows how the employment index remained in contractionary territory for the past 13 months as manufacturers keep scaling down production because demand is not improving: Source: BER
