Factory activity slips in November
Readings from the Absa PMI suggest that a strong recovery in production in the fourth quarter is unlikely
Manufacturing activity declined in November, with signs suggesting there is little chance of a recovery in manufacturing production in the fourth quarter of 2019.
The Absa purchasing managers index (PMI) fell to 47.7 index points in November from 48.1 in October, according to a release from the bank on Monday.
The declines were broad-based with four of the PMI’s five subcomponents slipping in November.
The reading for the PMI’s business activity subcomponent fell 39.4 index points in November, its lowest level since July 2017.
This comes as Stats SA data showed that manufacturing production fell quarter on quarter in the third quarter of 2019, suggesting that the sector will weigh on that quarter's GDP growth.
“The weak readings on the business activity index seen in the fourth quarter so far argue against a strong, if any, recovery in manufacturing output,” Absa said.
The Absa PMI — released in conjunction with Stellenbosch University’s Bureau for Economic Research’s — is a monthly gauge of business conditions in the manufacturing sector.
A reading below 50 points indicates a contraction in activity, while a reading above 50 indicates expansion in the sector. Manufacturing accounts for about 14% of SA’s GDP.
The subindex that tracks expected business conditions in the next six months rose to 47.4 index points in November.
Though this was the first increase after five consecutive decreases, the latest reading means that conditions are still expected to worsen in six months’ time, albeit less so than before, according to the bank.
The subcomponent tracking purchasing inventories was the only one to increase during November, rising to 44.1 points.
Despite the increase coming off decade lows reached in the previous months, the subindex remained below the 50-points neutral mark.