Absa PMI beats analysts’ expectations and rose above 50 in April
The purchasing managers’ index rose to 50.9 having dropped to 46.9 in March, indicating a slightly expanding manufacturing sector
After falling sharply in March, the Absa purchasing managers’ index (PMI) beat analysts’ expectations and rose above the neutral 50-mark again in April.
The index rose by four points to 50.9 in April. The PMI finally breached the 50-mark in February, rising to 50.8 index points but fell markedly in March to 46.9.
The index is compiled by the Bureau for Economic Research and gauges manufacturing activity. A score above 50 indicates an expanding manufacturing sector.
"This is more or less in line with the level recorded in February and above the average recorded during the first three months of the year," said Absa in a statement on Wednesday.
The improvement in the headline PMI was driven by increases in four of the five key sub-components, with only the supplier deliveries index dipping slightly lower. However, while the new sales orders index remained firmly in positive terrain, the other four sub-components were below 50.
The business activity index rose from 46 to 49.1 in April, while the employment index managed to edge up to 49.5.
"If demand holds up in coming months, activity should follow the new sales orders index into positive terrain" said Absa.
The index tracking expected business conditions in six months’ time declined for a second month to 69.6 in April, 10 points below the 17-year high reached in February.
Trading Economics forecast the PMI to increase to 47.5 while Investec expected a boost to 48. "The overall PMI results for March were disappointing, however, the avoidance of a Moody’s rating downgrade coupled with an interest rate cut, should boost private consumption and investment going forward, with forecasts for 2018 having been revised upwards," said Investec economist Lara Hodes.
Last month, the World Bank said upskilling workers in the manufacturing sector has the potential to address SA’s deeply entrenched challenges of poverty, inequality and unemployment.
The Standard Bank PMI, which measures sentiment in the entire economy and will be released on Friday, is expected to stay above the 50-mark, as President Cyril Ramaphosa’s election and the Cabinet reshuffle have helped boost sentiment.