Lift in manufacturing bodes well for third-quarter economic performance
Rebound in July likely to be the result of stronger domestic and global demand
01 August 2024 - 18:22
by Denene Erasmus
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Economic activity in SA’s manufacturing sector picked up strongly in July after a weak performance in May and June, an early indication that the economy is poised to perform better in the third quarter of 2024.
The Absa purchasing managers’ index (PMI), which is published by the Bureau for Economic Research (BER), improved by 6.7 points to 52.4 in July, better than the expectations of some economists who predicted the index would remain below 50 — in contractionary territory.
The PMI, a survey of purchasing managers in the manufacturing sector, assesses their business conditions and provides an important indicator of economic activity in the country.
The rebound in July is likely to be the result of stronger domestic and global demand filtering through to higher business activity and new sales orders.
The index tracking expected business conditions in six months’ time increased to 69.4 points in July from 68.1 in June. “This is the most optimistic respondents have been about business conditions going forward since early 2022,” economists at the BER said.
According to economists at Absa, the number probably reflected improved confidence after the formation of the government of national unity and stabilising electricity supply.
SA has not experienced load-shedding for more than four months. The last time SA enjoyed such a prolonged period of uninterrupted power supply was between March and July 2020, when load-shedding was suspended for 116 days, according to Eskom.
Meanwhile, input cost pressures continued to soften in July, likely the result of lower fuel prices and a stronger rand. That bodes well for producer price index (PPI) inflation for intermediate manufactured goods, said Absa.
“We believe that fuel price cuts at the start of July and a stronger rand contributed to lower prices during the month. We expect an additional 0.4% month on month of fuel price reductions in August, which could pull down input cost prices further.”
Annual producer price inflation for June was 4.6%, unchanged from May. However, the month-on-month PPI reading decreased 0.3%, according to the most recent data from Stats SA.
Producer price inflation has decreased markedly from 2023’s average of 6.7% and is forecast to average close to 4% in 2024.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Lift in manufacturing bodes well for third-quarter economic performance
Rebound in July likely to be the result of stronger domestic and global demand
Economic activity in SA’s manufacturing sector picked up strongly in July after a weak performance in May and June, an early indication that the economy is poised to perform better in the third quarter of 2024.
The Absa purchasing managers’ index (PMI), which is published by the Bureau for Economic Research (BER), improved by 6.7 points to 52.4 in July, better than the expectations of some economists who predicted the index would remain below 50 — in contractionary territory.
The PMI, a survey of purchasing managers in the manufacturing sector, assesses their business conditions and provides an important indicator of economic activity in the country.
The rebound in July is likely to be the result of stronger domestic and global demand filtering through to higher business activity and new sales orders.
The index tracking expected business conditions in six months’ time increased to 69.4 points in July from 68.1 in June. “This is the most optimistic respondents have been about business conditions going forward since early 2022,” economists at the BER said.
According to economists at Absa, the number probably reflected improved confidence after the formation of the government of national unity and stabilising electricity supply.
SA has not experienced load-shedding for more than four months. The last time SA enjoyed such a prolonged period of uninterrupted power supply was between March and July 2020, when load-shedding was suspended for 116 days, according to Eskom.
Meanwhile, input cost pressures continued to soften in July, likely the result of lower fuel prices and a stronger rand. That bodes well for producer price index (PPI) inflation for intermediate manufactured goods, said Absa.
“We believe that fuel price cuts at the start of July and a stronger rand contributed to lower prices during the month. We expect an additional 0.4% month on month of fuel price reductions in August, which could pull down input cost prices further.”
Annual producer price inflation for June was 4.6%, unchanged from May. However, the month-on-month PPI reading decreased 0.3%, according to the most recent data from Stats SA.
Producer price inflation has decreased markedly from 2023’s average of 6.7% and is forecast to average close to 4% in 2024.
erasmusd@businesslive.co.za
Mpact to sell Versapak for nearly R268m
Global PMIs show factories battled in July as demand wanes
Oil firmer on risk of Middle East conflict expanding
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.