PMI down slightly with concerns about global trade uncertainty

The Absa Purchasing Managers’ Index (PMI) was down slightly in February as respondents flagged global trade uncertainty as a concern. This was the fourth monthly consecutive contraction and reflects a moderation in economic activity and a contraction in local and international sales.

The seasonally adjusted Absa PMI declined slightly by 0.6 points to 44.7 points in February, remaining in contractionary terrain and indicating that the manufacturing sector has seemingly not picked up following its poor performance towards the end of last year.

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

In February the business activity index decreased by 2.9 points to 40.6. The BER says this is a response to a decline in demand as well as material input supply issues. New sales orders declined to 38.7 points from 42 in January.

Export sales dropped significantly, falling deeper into contractionary territory, mainly due to lower-than-expected demand, global trade disagreements and logistical issues.

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PMI indicates slower delivery times due to logistics constraints

The supplier deliveries index increased by 5.1 points to 55 points, indicating slower delivery times. The BER says while the index has been surprisingly volatile in recent months, the uptick could be a concerning signal that supply chains remain constrained and that orders have slowed down.

In line with lower output, the employment index also decreased by 2.3 points to 42.2 and remained in contractionary territory for the eleventh consecutive month. The inventories index ticked up slightly to 46.9 from 46.5 in January.

The purchasing price index increased by 2.2 points to 70.4 in February. The BER notes that the rand exchange rate was relatively weaker in February, while some input material prices increased amid a higher Brent crude oil price.

The BER says with the weaker rand, fuel prices increased for the fourth consecutive month at the beginning of February.

“Possibly amid concerns about further cost pressure and the ability to pass this on given weak demand conditions, the index tracking expected business conditions in six months’ time decreased further by 4.4 points to 60.5 in February.

“Uncertainties about global trade dynamics continued, with some respondents flagging that increased tension in SA-US relations had specifically worsened their prospects. The return of load shedding may have also weighed on sentiment,” the BER says.

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Weak demand and rising cost pressures evident in PMI

Jee-A van der Linde, senior economist at Oxford Economics Africa, says South Africa’s manufacturing sector is constrained by weak demand and rising cost pressures, while an increasingly uncertain external environment bodes ill for the near-term sectoral outlook.

“Indeed, the index tracking expected business conditions in six months’ time decreased further by 4.4 pts to 60.5 in February. Uncertainty about global trade dynamics and strained SA-US relations were among the main concerns that respondents flagged.

“Moreover, the brief return of load shedding may have also weighed on sentiment amid soft domestic demand for manufactured goods and rising prices. We retain our slightly below-consensus 2025 real gross domestic product (GDP) growth forecast of 1.5% for 2025.”