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More upbeat view of economic activity going forward - survey

Jan 12 2018 17:23
Carin Smith

Cape Town - Respondents to the latest Absa Purchasing Managers' Index (PMI) were significantly more upbeat about business conditions in SA going forward than they were during the second half of 2017.

The Absa PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) at Stellenbosch University.

One of the index's sub-indexes, which tracks expected business conditions in six months' time, rose to 61.9 in December, from 50 in November. According to the index report, this suggests that, in the absence of any adverse shocks, the sector could perform better through 2018.

According to the latest index report, the more upbeat view comes despite the SA manufacturing sector ending 2017 on the back foot.

But while the sub-index tracking expected business conditions in the future rose in December, the overall PMI index declined after four consecutive months of improvements.

Absa and the BER announced on Friday that the December PMI declined to 44.9 points compared to 48.6 points in November. The index report describes the December level as "dismal".

Broad-based deterioration

The index report points out that the deterioration in December was broad-based, with all five sub-components of the headline index falling compared to November's level.

This is in sharp contrast to J.P Morgan's global index's performance, which reported that global manufacturing PMI reached a near seven-year high of 54.5 points in December.

Of the major sub-components of the Absa PMI, the seasonally adjusted business activity index recorded the biggest fall. The index declined from 48 in November to 42.7 in December.

The new sales orders index shed 4.1 points to reach 45 in December.

"The declines in these indices were disappointing, after both indices (and the headline PMI) trended up nicely over the past few months," states the report.

The purchasing price index fell to 75.3 in December from 80.7 in November. The decline was despite a fuel price hike at the start of December.

"However, the significantly stronger rand exchange rate during the month outweighed the uptick in importers of raw materials and intermediate products," the report concludes.

The Business Confidence Index (BCI) released by the SA Chamber of Commerce and Industry (Sacci) on Wednesday also shows an improvement.

According to Sacci, the improvement in business confidence is only partially due to recent political developments in SA. These would include the recent election of Deputy President Cyril Ramaphosa as ANC president, and no further downgrades by ratings agencies in December.

Sacci said political developments in the wider Southern African region also contributed to raising business expectations, including political developments in Zimbabwe.

Earlier in January, Fin24 reported that the Standard Bank PMI for December also showed a deterioration in the health of the private sector. It was mainly due to a decline in business activity.

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