The seasonally adjusted Absa Purchasing Managers’ Index (PMI) slipped back to below 50 points in March 2024.
The headline index declined from 51.7 in February to 49.2 in March. The 50 point mark separates expansion from contraction.
Absa said that the PMI was choppy in recent months, but the average for the first quarter of this year was equal to the final quarter of last year.
In the fourth quarter, the gross value added by the sector managed to eke out a 0.2% quarter-on-quarter expansion, with a more robust annual increase.
The PMI generally suggests a similar experience is possible in the first quarter.
“Following robust improvements in February, both the business activity and new sales orders index declined in March – although the indices remained above recent lows seen in January. Indeed, comments by respondents suggest that demand conditions were sluggish,” Absa said in a statement on Tuesday.
A potentially more positive development was the steep decline in the supplier deliveries index. Absa stated that the index declined from 62 to 54.1.
“The reason for this being potentially positive news is that it could be one of the first signs that congestion at the local ports is easing somewhat, and deliveries of (imported) supplies are now coming through faster. This index is inverted, so faster deliveries result in a decline in the index,” Absa further said.
Faster deliveries during times of uncongested and unconstrained supply chains are generally seen as a negative for the sector as it means suppliers are less busy (due to less demand from other clients), and thus, goods are able to get to the respondent faster.
This could have played some role in March given that demand for manufactured goods weakened, assuming so did demand by manufacturers for inputs.
“Given respondents' commentary over recent months and other (anecdotal) evidence, better-working supply chains are a more likely reason for the improvement in delivery times. This could, over time, also lift inventories of intermediate goods and raw materials, which ticked down slightly in March. Another positive development was the further improvement in sentiment towards business conditions in the future,” Absa said.
The index tracking expected business conditions in six months’ time rose to a solid 62.1 points.
“This is the most upbeat respondents have been about business conditions going forward since the start of 2023. More concerning is that cost pressure continues to build with the purchasing price index up for a fourth consecutive month. This is likely, to a large extent, driven by increases in the fuel price,” it said.
BUSINESS REPORT