Dead cat bounce: Absa Purchasing Managers’ Index rises slightly in April, but remains in negative terrain

Absa said the modest rise hardly pointed to a meaningful rebound in the manufacturing sector. 

“Despite the improvement, the index failed to edge back above the neutral 50-point mark as business activity and new sales orders worsened relative to March... The underlying survey results suggest that the sector experienced another tough month at the start of the second quarter amid intense load shedding hurting output, and demand remaining under pressure,” Absa said in a statement. 

Aside from a surge in the inventories index to 58.8 from 47.6 in March – attributed to improved deliveries of goods – most of the key subindices fell further in April. 

The business activity index declined to 47.6 in April from 48.1. 



“The business activity index had a poor start to the second quarter of 2023. The current level is more or less in line with the fourth quarter (Q4) 2022 average when the sector contracted and deducted from GDP growth. Respondent commentary once again referred to load shedding hurting production,” Absa said. 

Meanwhile, the new sales orders index fell to 44.3 in April from 48.5 in March – a signal that demand is evaporating. 

“Export sales remained in positive terrain but weakened relative to February and March,” Absa said.

This is concerning as relatively buoyant export demand was helping to compensate for fragile domestic demand. But the latest Chief Economists Outlook, a survey compiled by the World Economic Forum, finds that experts are evenly divided on the prospects for a global recession this year. That points to a cloud of uncertainty about the global economy, and if it did fall into recession, it would obviously be bad for South African exports. 

“Looking forward, purchasing managers now only see a marginal improvement in future business conditions. The index tracking expected business conditions in six months’ time declined from 55.5 to 51 in April. The expectation of a harsh winter ahead regarding load shedding and uncertainty about the strength of global demand, with the manufacturing sector in major European trading partners under pressure, likely depressed expectations,” Absa said. 

The bottom line is that the manufacturing sector got off to a poor start in April against the backdrop of an economy that may have contracted in the first quarter of this year, pushing it into recession. 

And with the power crisis likely to worsen as winter sets in, any hopes of a recovery are down the drain. DM/BM