After four consecutive months of improvements, the Absa purchasing managers index (PMI) has fallen significantly.

The seasonally adjusted PMI fell by a dramatic 3.7 points to 44.9 index points in December 2017 from 48.6 index points in November.

The index is compiled by the Bureau for Economic Research and gauges manufacturing activity. A score under 50 indicates a declining manufacturing sector. Notably, it is the seventh consecutive month the index indicated SA’s factory output is declining.

The deterioration was broad-based with all five subcomponents of the headline index falling from November.

Absa said on Friday: "The dismal PMI reading suggests that the South African manufacturing sector ended the year on the back foot. This is in sharp contrast to the global performance, with the JP Morgan global manufacturing PMI reaching a near seven-year high of 54.5 points in December."

Trading Economics forecast the PMI to fall to 46.7 index points while Investec expected a boost to 49 index points.

This comes after Statistics SA data on Thursday showed that manufacturing had increased for the second consecutive month in November on the back of the global upswing. With strong global growth predicted, economists expect the sector to benefit.

Despite the overall drop in the PMI, respondents were significantly more upbeat about conditions in the future, with the index tracking expected business conditions in six months’ time rising to 61.9 from 50 in November.

"This suggests that, in the absence of any adverse shocks, the sector could perform better through 2018," Absa said.

Last week, Standard Bank’s PMI also indicated that the health of the South African private sector was expected to continue to deteriorate given the weak economic conditions.

The Standard Bank PMI, which looks at the whole economy, remained in contractionary territory for a fifth consecutive month, dropping slightly to 48.4 in December from 48.8 in November.

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