Absa PMI bounces back to positive levels in July, signalling solid manufacturing start to Q3

The Absa Purchasing Managers' Index for August. (Graph: Sourced)

By Ed Stoddard

1 Aug 2024

The Absa Purchasing Managers’ Index, a key gauge of confidence in the manufacturing sector, rose back into positive territory in July. This is the latest signal that South Africa’s economy may finally be turning the corner.

The Absa Purchasing Managers’ Index (PMI) rose 6.7 points in July to 52.4 from 45.7 in June, bringing it back into positive territory and signalling a solid start to the third quarter (Q3) of the year for the manufacturing sector.

absa pmi (Graph: Sourced)

It’s a significant improvement from May and June, when uncertainty around the general election and its outcome weighed on sentiment, detracting from the huge improvements in the supply of power.

“In these months, significant policy uncertainty remained and hurt demand,” Absa said.

But in July, the stars started to align. The Government of National Unity (GNU) was in place and Eskom managed to keep the lights on during the coldest spells of winter, while there were also signs of an uptick in global demand.

Among the sub-indices, there was a notable bounce in the one measuring business activity, which jumped 14.5 points to 50.8 in July. New sales orders surged 17.5 points to 55.4.

“The improvements suggest that on-hold orders are now being realised and translated into better activity. Furthermore, export sales increased significantly in July following four consecutive months of declines,” Absa said.

But some thorns emerged among the rosebuds. The index measuring suppliers’ performance, which is inverted – meaning a rise is bad and a fall is good – increased almost six points to 61.9 in July.

“This may indicate that suppliers are not coping with handling the increases in demand following months of slower activity,” Absa noted.

The employment index meanwhile dipped to 45.4 in July from 46.3 in June, suggesting that the uptick in activity is not translating into job creation.

Overall, it must be said that the latest PMI read hardly points to robust confidence among purchasing managers in South Africa’s manufacturing sector – 52.4 is just a passing grade on a scale of zero to 100.

In May, the last month for which data is available, manufacturing production declined 0.6% year on year and 3.2% on a monthly basis. This was reflected in the May PMI data and the June production figures, scheduled for release on 8 August, are also likely to be relatively poor.

But with the GNU in place, a (mostly) stable power supply, and global demand picking up, South Africa’s manufacturing sector - and the wider economy – may be turning a corner. DM

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