Industrial activity in the South African manufacturing sector returned to strong growth in August following a record single-month decline in July.
The Absa Purchasing Manufacturers Index (PMI) more than recovered from last month’s steep decline, rising to 57.9 points in August from a very low 43.5 points in July.
In July, the PMI reading fell to the lowest level since May 2020 as the manufacturing sector suffered severe supply chain disruptions due to civil unrest and lockdown restrictions.
Absa said both the output and new orders sub-indices recorded solid improvements during the month.
Absa senior economist Miyelani Maluleke said the recovery was always on the cards in August due to normalisation of demand and output for businesses affected by July’s looting, and a further boost from less strict lockdown restrictions.
Maluleke said the extent of the rebound was nonetheless encouraging, especially on the orders and activity front.
“That being said, even if September’s headline PMI print remains at the elevated level seen in August, the third quarter as a whole will be lower than the second quarter due to the severity of the shock experienced in July,” Maluleke said.
The PMI showed that both the business activity and new sales order indices erased July’s losses and returned to levels slightly above those seen in June.
Business activity came in at 58.5 points and new sales orders at 60.9 points, both about 30 points better than July’s print.
The inventories index also recovered the previous month’s losses to reach 54 index points, from 39.1 points in July.
However, the employment index edged down somewhat further in August as respondents also turned somewhat less optimistic about business conditions going forward.
The index tracking expected business conditions in six months’ time fell to 59.7 points, from 64.3 points in July.
Absa said renewed concerns about the strength of the global economic recovery amid the spread of the Delta Covid-19 variant might have contributed to this decline.
The purchasing price index ticked up again after four consecutive declines, with the higher fuel price at the start of August likely contributing to the renewed rise in costs.
Investec economist Kamilla Kaplan said supply chain constraints persisted in August with the supplier deliveries sub-index remaining elevated and above average at 68.9 index points.
“These supply chain issues likely continued to exert upward pressures on input costs for manufacturers. The fuel price hikes in August were also identified as a key contributing factor,” Kaplan said.
BUSINESS REPORT