Johannesburg – The seasonally adjusted Absa
Purchasing Managers’ Index (PMI) slumped in April 2017, after a solid
performance during the first quarter of 2017.
The index fell to 44.7 index points from an average of
51.9 during the first quarter. The decline was relatively broad based, with key
subcomponents measuring business activity and inventories slumping to
multi-year lows, says Absa.
While the deterioration is worrying, the magnitude of the
drop may not be reflected fully in official data as actual growth was already
weaker in January and February than signalled by the higher PMI readings.
Nonetheless, the survey suggests that the sector experienced a rough start to
the second quarter of 2017, the bank notes.
The new sales orders index declined sharply in
April, pulling along business activity. The 8.3-point fall in orders was
likely driven by (the expectation of) weaker demand from local customers, as
respondents still noted an improvement in export orders, it says.
The inventories index also moved lower in
April, dropping to the lowest level since 2009. The declines in these three
indices were so steep, that the fact that the two other PMI subindices
(accounting for a combined 35 percent weighting of the headline) remained above
50 points could not prevent the headline figure from slipping sharply lower.
The index tracking employment stayed more or
less unchanged at 50.3 points, while suppliers’ performance rose by 2
points to 53.
This was the first full survey after the recent cabinet
reshuffle and subsequent sovereign credit rating downgrades. It is likely that
respondents now anticipate economic growth and domestic demand to be weaker
than before, says Absa.
Read also: Absa's PMI at 8-month high
As such, they have likely scaled back expectations for
orders and activity growth going forward, it says.
This is reflected in the decline of the index measuring expected
business conditions in six months’ time, Absa explains. The index fell to 55.8
points in April from 68 in March. It is also possible that the soured sentiment
is reflected in the responses for questions pertaining to activity and demand,
thereby resulting in a bigger downturn.
The purchasing price index increased in April
after moving lower in February and March. This was driven by the weaker rand
exchange rate and higher Brent crude oil prices (on average) during the month.
With another fuel price increase effective from tomorrow, costs could continue
to move higher, says Absa.
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