Purchasing managers in South Africa are less then impressed by the operating conditions in South Africa following a strong start to the second quarter of the year.
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) has dropped below the neutral level of 50, limiting the improvement seen at the start of the second quarter.
The PMI increased by 1.9 points from 43.8 in May 2024 to 5.7 points in June 2024.
Although the improvement was welcomed, it was the second straight month that the PMI remained below the 50-point mark.
“Following a very strong start to the second quarter, which was also reflected in solid growth in official manufacturing production data, May and June have been poor,” said the Bureau for Economic Research.
“Indeed, the business activity index average is barely higher in Q2 than in Q1.”
“Despite the stable electricity supply through Q2, insufficient demand seems to have weighed heavily on the sector’s performance.”
The business activity index dropped further from 38.1 points in May to 36.3 in June, which is very downbeat considering the strong start to the second quarter.
“Furthermore, new sales orders remain muted, edging up to 37.9 points in June from 37.8 points in May,” said the BER.
Many comments highlighted the depressed demand conditions, with export sales being stuck below the neutral 50-point mark for four consecutive months, suggesting that the weakness is not just coming from domestic demand.
Supplier deliveries also worsened (meaning that they take longer to arrive), with the index measuring suppliers’ performance increasing from 55.4 in May to 56.1 in June.
Port issues remain a concern, with many imports and exports held up at Transnet’s poor ports.
However, when looking at more positive news, the purchasing price index declined for the third straight month, falling from 66.9 in May to 64.5 in June.
“This is the lowest reading in six months, indicating that recent signs of easing cost pressure have been sustained.”
“At the beginning of June, petrol prices fell by R1.24 a litre, while diesel prices fell between R1.09 and R1.19, depending on the grade. A further fuel price decline is expected in July, which would help alleviate more pressure on costs.”
More good news could be found in the index for expected business conditions in six months’ time, which increased from 57.6 in May to 68.1 points in June. This is the only measure that looks at sentiment and the significant increase in good news.
“Indeed, respondents have not been this optimistic about business conditions since early 2022.”
“The prevailing political uncertainty (at the time of the survey in the last week of June) should have diminished over this time period, and there could be hope that domestic and global demand could look better amid expected monetary policy easing.”
Much of the uncertainty likely dealt with the makeup of Ramaphosa’s cabinet, with the DA and ANC still negotiating over positions as part of the Government of National Unity.
Ramaphosa announced his cabinet last night, with Ministries in Agriculture, Basic Education, Home Affairs, Public Works and Infrastructure and Communications going to the DA.
The results from the BER’s study can be found below:
| Index | April | May | June |
| Business activity | 57.2 | 38.1 | 36.3 |
| New sales orders | 55.6 | 37.8 | 37.9 |
| Employment | 49.4 | 43.5 | 46.3 |
| Inventories | 50.7 | 44.5 | 51.9 |
| Supplier deliveries* | 57.4 | 55.4 | 56.1 |
| Purchasing prices* | 72.4 | 66.9 | 64.5 |
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