Manufacturing Sector Performs Poorly For Second Consecutive Month

The index increased by 1.9 points to reach 45.7 points in June 2024, while in May 2024 it was at 43.8.

Absa welcomes the improvement but raises concerns that the Purchasing Managers Index (PMI) remained below the 50-point mark for the second consecutive month. However, they note there was a very strong start to the second quarter, which earned the growth in manufacturing production data.

The suspension of load-shedding would have helped business activity in the second quarter to perform higher, but the index shows that the insufficient demand seemed to have weighed heavily on the sector. The business activity index declined further to 36.3 points in June, from 38.1 points in May. This is very downbeat following 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.

The index also reveals that export sales have been stuck below the neutral 50-point mark for four consecutive months, which suggests that the weakness is not just coming from domestic demand. Supplier deliveries are worsening (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 likely remain a concern.

Jee-A van der Linde, senior economist at Oxford Economics Africa says the latest outturn aligns with their view that weak demand probably offset the impact of load-shedding reprieve during Q2 2024. Political uncertainty also would have weighed on sentiment during the past quarter, leading to businesses opting for a wait-and-see approach.