Manufacturing Sentiment Improved In October

5 November 2019 – Manufacturing activity recovered in October, improving on the previous month’s revised figures and beating market expectations.

However, sentiment in the industry remains subdued thanks to prevailing difficult business conditions, weighed on by the worry about global growth and electricity shortages in SA.

The seasonally adjusted Absa purchasing managers index (PMI) rose to 48.1 points in October, up from a revised 45.1 points in September. The increase was well above market expectations of 41.8.

The index has, however, remained under the neutral 50 point mark for most of the year — managing to breach the midpoint only in January and July, Absa said in a statement released on Friday.

The Absa PMI, released in conjunction with Stellenbosch University’s Bureau for Economic Research (BER), is a monthly gauge of manufacturing activity and an early indicator of underlying economic activity in SA.

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 October PMI incorporated updated seasonal adjustments, conducted once a year, but the weightings on the five main sub-components of the index have also been adjusted, resulting in larger revisions to the historic data, Absa said.

Four of the index’s sub-components improved on September’s figures, while only purchasing prices declined. But the sub-index that tracks what business conditions manufacturers expect in six months’ time fell to 45.7. 

This is the lowest level in a year, which the bank put down to the concern about the slowing global growth — hurting demand for exported goods — and the effect of October’s bout of load-shedding locally. Source (Business Live)