Latest news with #AbsaPurchasingManagers'Index
IOL News
5 days ago
- Business
- IOL News
Manufacturing sector sees unexpected resurgence in July after eight months of decline
The last time the headline PMI was in the above-50 expansionary territory was in October 2023 at 52.6 points. Image: David Ritchie/Independent Newspapers. Manufacturing activity in South Africa in July returned to positive territory for the first time in nine months, in a significant turnaround for the struggling economy. The Absa Purchasing Managers' Index (PMI) released on Friday indicated that the index edged above the 50-point mark and recorded an expansion, following eight consecutive months in contractionary territory. The last time the headline PMI was in the above-50 expansionary territory was in October 2023 at 52.6 points. According to Absa, new sales orders rose by 9.7 points to 55.9 in July, recording a third consecutive month of improvement and signalling a much stronger recovery in demand at the start of the third quarter. 'Export sales also showed a significant increase, but at a low level, signalling that manufacturers remain cautious amid regulations and ongoing trade negotiations,' Absa said. 'The improvement in demand fostered an uptick in production, seeing the business activity index tick up 5.2 points to 47.1 points in July – still coming in below the neutral-50 mark for the ninth consecutive month.' Absa added that the supplier deliveries index increased by 1.4 points to 56.4 in July on the back of the strong uptick in new orders, which typically leads to longer delivery times and some delays. 'Despite the strong recovery in demand which filtered through into an uptick in production, the employment index declined by 6 points in July, reaching 43.7 - reversing the gains made in June and returning to levels seen earlier in the year,' it said. 'The weak employment level may be due to the slow recovery in activity, which, despite ticking up, remains in contractionary territory, signalling that manufacturers may wait to see a stronger recovery in demand before increasing employment.' The purchasing price index also increased by 1.2 points in July, signalling growing cost pressures as the cost of some input materials increased. Absa noted that crude oil prices increased fuel prices in the country, with petrol and diesel prices rising by 52 to 84 cents a litre, depending on the grade. It said the positive news was that, despite the uptick in the index, the current levels remained the second-lowest in over eight years. Furthermore, despite heightened global uncertainty, Absa said the rand stayed below R18/$ for July. However, Absa note that expected business conditions in six months' time declined from 62.5 points in June to 56.4 in July. 'Although still above the 50-neutral level, the direction of the index suggests that manufacturers are faced with an increasingly volatile and challenging trading environment on both the global and domestic front.' Investec economists have welcomed the findings of the PMI, a survey conducted by the Bureau for Economic Research (BER) and sponsored by Absa. Investec economist Lara Hodes said the PMI moved into expansionary territory in July after tracking below 50 since October last year. 'Specifically, it rose by 2.3 points to 50.8. The new sales orders index jumped to 55.9 from 46.1 previously, indicating 'a much stronger recovery in demand at the start of the third quarter,' according to the BER,' Hodes said. 'Export sales picked up from low levels logged in previous months; however, uncertainty around trade tariffs has weighed notably on manufacturers.'
The Citizen
01-08-2025
- Business
- The Citizen
Good news for GDP: Manufacturing PMI reaches above 50 points, but employment levels still weak
A score above 50 indicates the sector is growing, while a score below 50 means it is shrinking. Manufacturing PMI in July 2025 has reached above the 50 point mark and recorded an expansion for the first time in nine months. 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. It measures the health of South Africa's manufacturing sector. For July 2025, the seasonally adjusted PMI increased by 2.3 points to 50.8. The increase is attributed to a strong recovery in demand. ALSO READ: Absa PMI increases but in contractionary territory for eighth consecutive month First in nine months Absa said the last time the headline PMI was in the above-50 expansionary territory was in October 2024 at 52.6 points. PMI is based on feedback from purchasing managers about business like new orders, production levels, employment, supplier deliveries and inventories. A score above 50 indicates the sector is growing, while a score below 50 means it is shrinking. The index matters because it is used as an early warning system for the economy. Manufacturing drives growth, as the sector is linked directly to exports, employment and demand for raw materials. Drivers of the good news 'New sales orders rose by 9.7 points to 55.9 in July, recording a third consecutive month of improvement and signalling a much stronger recovery in demand at the start of the third quarter,' read the Index. BER said export sales also showed a significant increase, but at a low level, signalling that manufacturers remain cautious amid regulations and ongoing trade negotiations. The improvement in demand fostered an uptick in production, seeing the business activity index tick up 5.2 points to 47.1 points in July – still coming in below the neutral-50 mark for the ninth consecutive month. ALSO READ: Act now to absorb impact of Trump tariffs on SA vehicle manufacturing sector – BLSA Recovery in demand The index shows that the supplier deliveries increased by 1.4 points to 56.4 in July on the back of the strong uptick in new orders, which typically leads to longer delivery times and some delays. 'Despite the strong recovery in demand, which filtered through into an uptick in production, the employment index declined by 6 points in July, reaching 43.7, reversing the gains made in June and returning to levels seen earlier in the year. 'The weak employment level may be due to the slow recovery in activity, which, despite ticking up, remains in contractionary territory, signalling that manufacturers may wait to see a stronger recovery in demand before increasing employment.' Growing cost pressures BER added that the purchasing price index increased by 1.2 points in July, signalling growing cost pressures as the cost of some input materials increased. 'Crude oil prices increased fuel prices in the country, with petrol and diesel prices rising by 52 to 84 cents a litre, depending on the grade. The positive news is that, despite the uptick in the index, the current levels remain the second-lowest in over eight years.' The index tracking expected business conditions in six months' time declined from 62.5 points in June to 56.4 in July. 'Although still above the 50-neutral level, the direction of the index suggests that manufacturers are faced with an increasingly volatile and challenging trading environment on both the global and domestic front.' NOW READ: Sectors showing growth in job opportunities in SA
IOL News
02-07-2025
- Business
- IOL News
Manufacturing industry sentiment shows slight improvement, still in contraction
The Absa Purchasing Managers' Index (PMI) June 2025 released on Tuesday increased by 5.4 points to 48.5 in June 2025 but remained in contractionary territory for the eighth consecutive month.. Sentiment in the manufacturing industry in South Africa remained in the contractionary territory despite ticked up slightly in June, marking its second-highest reading of the year. Data from the Absa Purchasing Managers' Index (PMI) on Tuesday revealed a modest recovery in South Africa's economic landscape, with the index rising by 5.4 points to reach 48.5 in June from 43.1 in May. Despite this encouraging movement, the PMI indicated that the economy remained in contractionary territory for the eighth consecutive month., revealing the ongoing struggles facing the nation. Nonetheless, economists welcomed this increase, noting that the 5.4-point gain stood as the most significant rise since the 9-point jump recorded between August and September of 2024. Nkosiphindile Shange, economist at the Bureau for Economic Research, which conducts the PMI on behalf of Absa, said new sales orders increased by 7.8 points to 46.1 in June, signalling some recovery in demand. 'While export sales recovered somewhat in June relative to May, volumes remain near the lowest levels seen this year. This suggests that domestic demand boosted the large recovery in total new sales orders,' he said. 'However, the improvement in demand failed to boost production as the business activity index decreased by 1.5 points to 41.9 points in June.' In response to the uptick in orders, the supplier deliveries index also noted an increase, rising by 6 points to 55.1, which signals extended delivery times linked to heightened order volumes. Interestingly, there were no significant supply bottlenecks reported, implying that suppliers have coped with the heightened demand so far. On a more positive note, the employment index recorded a substantial jump of 9.7 points to 49.7, marking its highest level since March 2024. Despite this encouraging trend, economists cautioned that continued improvements are necessary before asserting that the manufacturing sector is on a path of recovery. The purchasing price index, indicating inflationary pressures, continued its downward trajectory, decreasing by 2.3 points to 58.1 in June. Economists noted that the stronger performance of the rand—averaging 40 cents firmer against the dollar throughout June—coupled with a decline in diesel prices earlier in the month, played a role in this positive movement. Professor Raymond Parsons, an economist from the North West University, said this was a positive but modest trend. Parsons said the priority now was to build on the incipient economic upturn in ways that guarantee a sustained recovery. 'Although higher in June 2025, the Absa PMI again, nonetheless, confirms that the SA economy is still struggling to gain momentum. By still being in negative territory for an eighth consecutive month, high-frequency data like the Absa PMI is still sending out mixed signals about the strength of the economic recovery,' Parsons said. Efficient Group chief economist, Dawie Roodt, said the problem with the South African economy was mainly growth, or lack thereof. 'We are flirting with recession; it's just not going anywhere at the moment. What we actually need is some sort of jolt, some sort of reaction from politicians to get the economy out of this situation,' Roodt said. 'The PMI illustrates this that it's a little better, but it's still in contractionary territory. It's not good; we need new policies and ideas for something different to get the economy growing.' Investec chief economist, Annabel Bishop, said the manufacturing sector's contraction was reflective of the insufficient capacity of the ports and rail to export out bulk commodities. 'Progress on improving Transnet's capacity, on both the rail and port sides to end the domestic freight crisis that weakens South Africa's growth rate, continues to be too slow, with both mining and manufacturing production contracting in Q1.25,' she said. 'Bouts of load shedding starting up this year signify insufficient electricity supply to consistently meet demand when planned and unplanned maintenance occurs, with the country's extremely aged electricity distribution system prone to breakdowns. 'In the main, while load shedding remains largely in abeyance, economic growth does put strain on the aged grid and limits the economy's growth beyond 1.0% y/y, with the PPP's planned to drive improved supply conditions yet to sufficiently occur.' BUSINESS REPORT
The Citizen
01-07-2025
- Business
- The Citizen
Absa PMI increases but in contractionary territory for eighth consecutive month
The PMI shows that South Africa's manufacturing sector can just not succeed in getting the numbers to make the economy grow. The Absa PMI increased in June by 5.4 points to 48.5, but the headline PMI remained in contractionary territory for the eighth consecutive month, although it is encouraging to note that the current level is the second highest in 2025 after the 48.7 points in March. The 5.4-point increase is also the highest increase since the 9-point jump between August and September last year. 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. On the positive side, new sales orders increased by 7.8 points to 46.1 in June, signalling some recovery in demand according to the BER. While export sales recovered somewhat in June compared to May, volumes remain near the lowest levels seen this year. The BER says this suggests that domestic demand boosted the large recovery in total new sales orders. However, the improvement in demand failed to boost production as the business activity index decreased by 1.5 points to 41.9 points in June. ALSO READ: Manufacturing PMI for April shows deteriorating SA economy Supplier deliveries and employment in Absa PMI increased The supplier deliveries index increased by 6 points to 55.1 in June. The BER says this indicates that the delivery times were extended due to some delays, possibly due to the uptick in orders and suppliers becoming busier, as respondents did not mention any significant supply bottlenecks. The employment index increased by 9.7 points in June, reaching 49.7 points, the highest since March 2024. The BER says this is a big jump for this index, but it needs to be sustained for some months before we can be confident that the manufacturing sector is adding jobs at a significant pace. The purchasing price index continued its downward trajectory, decreasing by 2.3 points to 58.1 in June. The BER points out that despite some volatility, the rand was on average 40c stronger to the dollar in June than in May and stayed below R18/$ for a large part of the month. On average, the Brent crude oil price was higher in June than in May, but the decline in diesel prices at the start of June likely helped. The index tracking expected business conditions in six months' time was unchanged at 62.5 points in June, after a significant 13.9 points increase in May. The BER says the apparent end to the 12-day war between Israel and Iran may have helped ease nerves, with no further news on the global tariff front. ALSO READ: PMI down slightly with concerns about global trade uncertainty Manufacturing activity remains weak Jee-A van der Linde, senior economist at Oxford Economics Africa, says despite the fact that South Africa's manufacturing PMI recovered partially in June driven by a mild improvement in demand, overall manufacturing activity remains weak, with the second-quarter PMI average lower on a quarterly basis at 45.4, below the previous quarter's 46.2. He says this suggests that a quarterly contraction in the manufacturing sector is also likely for the second quarter. Van der Linde also points out that despite the increase in the new sales orders index, his improvement failed to boost production as the business activity index declined and although the employment index increased strongly, it remains to be seen whether this momentum can be sustained and translate into sustainable job creation. This chart shows that the second quarter average of 45.4 is lower than the 46.2 average at the start of 2025: PMI must make up for poor performance in first quarter in second quarter He says, after a poor performance in the first quarter, the manufacturing sector must make up considerable ground in the second quarter. 'Although actual production increased by 1.9% compared to April, factory output levels were still 6.3% lower than last year, with the May manufacturing PMI number indicating activity remained sluggish due to muted demand. 'When factoring in the June PMI numbers, it is evident that the second-quarter average is lower than the preceding three-month period. This aligns with our overall view for the South African economy, which is that general activity is unlikely to have improved from the start of the year.' ALSO READ: SA business activity runs out of steam at end of 2024, but not all bad — PMI This table shows that despite a broad improvement in June, the PMI remains stuck in contractionary territory: Source: BER
IOL News
11-06-2025
- Business
- IOL News
Manufacturing in dire straits as production plummets 6. 3% year-on-year
The manufacturing sector's poor performance aligns with the Absa Purchasing Managers' Index, which moved further into contractionary territory in April Image: Supplied South Africa's manufacturing production nosedived 6.3% year-on-year in April 2025, worse than economists had expected, although in line with a global slowdown in the production side of most economies. Statistics South Africa released data that showed that food and beverages were hardest hit as a subsector, declining 7.6% and slicing off 1.8 percentage points from the headline figure. This follows an already unfavourable performance in the first quarter, where manufacturing dragged down gross domestic product. Manufacturing was, at one point, considered the backbone of the country's industrialisation efforts and a critical employer of semi-skilled workers. The sector, which accounts for about 14% of GDP, employs about 1.6 million South Africans. Basic iron and steel, non-ferrous metal products, metal products and machinery's decline resulted in a negative contribution of 1.4 percentage points, while the motor vehicles, parts and accessories and other transport equipment sector slumped a staggering 13%, removing another 1.2 percentage points. The petroleum, chemical products, rubber and plastic products division also contracted by 4.7%, further dragging down the overall figure by an additional percentage point. While there was a slight month-on-month increase of 1.9% in April compared to March, the three-month trend shows a 1.4% decrease, with seven out of ten manufacturing divisions reporting negative growth. Investec economist Lara Hodes described the decline as "notable" and worse than a Bloomberg consensus expectation of a 4.5% year-on-year drop. "The decline was broad based, with all sectors except the glass and non-metallic mineral products grouping declining year-on-year," she said. She highlighted that within the food and beverages segment, the beverages and other foods sub-categories were largely responsible for the notable decline. The manufacturing sector's poor performance aligns with the Absa Purchasing Managers' Index, which moved further into contractionary territory in April, said Hodes. Citing the Bureau for Economic Research, Hodes added that 'the index tracking export sales returned to contractionary levels'. Thanda Sithole, FNB senior economist, said 'Operating conditions for domestic manufacturers remain unfavourable'. Statistics South Africa's figures show a picture similar to that of the rest of the world, with Hodes noting that "manufacturing operating conditions globally deteriorated for the first time in four months in April," citing the JP Morgan Global Manufacturing PMI survey. New orders decreased, trade conditions worsened, jobs were cut, and business optimism slumped, JP Morgan found. IOL
