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Cape Town - The seasonally adjusted ABSA Purchasing Managers’ Index (PMI) dropped back below the neutral 50-point mark in March after encouraging improvements during the first two months of the year, the bank said on Tuesday.
The index shed 3.9 points to reach a level of 46.9 in March from 50.8 in February. The key drivers of the headline PMI fall were sharp declines in the business activity and new sales orders indices, while inventories continued to decline. The business activity index fell by 8.1 points to 46.0, while new sales orders declined by a similar margin to reach 44.5 in March.
Respondents indicated that exports declined during the month which, according to ABSA, could explain the deterioration in overall sales orders. ABSA pointed out that exports could have been affected by the recent stronger rand exchange rate, which can weigh on competitiveness of local goods in international markets.
The dip in demand, in turn, filtered through to lower activity levels. The inventories index fell further below the neutral 50-point mark to 41.4 – the lowest level since April 2017.
After three months of sharp improvements, the index tracking expected business conditions in six months’ time declined from its best level since 2001. The index fell from 79.1 to 73.7 in March - still high from a historic perspective.
The purchasing price index edged slightly higher in March after three straight declines. ABSA said the uptick was likely driven by the slightly higher Brent crude oil price during the month, while the rand was also marginally weaker against the dollar.
ABSA indicated at the beginning of February that its PMI for January showed expectations of business conditions in six months' time to be the best since early 2010. It ascribed the improvement at the time as likely due to the stronger global growth outlook as well as better prospects for the South African economy. The ABSA PMI for January was the best since May 2017.At the time, ABSA said the PMI for January suggested the local manufacturing sector started 2018 on relatively solid ground, compared to what the index reflected in recent readings before that.
(Source: Absa)
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