Manufacturing Output Steadily Improving, But Demand Subdued

6 August 2020 – Manufacturing output levels are stabilising, but employment prospects are still worrying, the Absa Purchasing Manager’s Index for July revealed.

The data released on Monday shows the PMI for July was slightly lower at 51.2 index points than the month of June which recoded 53.9 index points. The index however is still above the 50-neutral mark which shows that manufacturing output has been improving.

The business activity sub-index declined slightly from the previous month, but was still at elevated levels. “Some respondents noted that activity is not yet back to pre-lockdown levels despite the sharp monthly increases signaled since the slump in April,” the report read.

Respondents also reported increases in output levels, but also still below pre-lockdown levels. Demand is also still low with the new sales order sub-index declining slightly. “The fact that more respondents signalled a further increase in output compared to those seeing further growth in demand, could perhaps be explained by some firms producing more in an attempt to catch up on production lost during earlier stricter lockdown levels,” the report read.

“On the local front, producers supplying the hospitality sector specifically remarked on continued weak demand, while those in the alcoholic beverages industry also reported a renewed drop in sales,” it noted.

On the flipside it also showed that export sales had been lifting slightly, a first since October 2019.

Weak employment

The employment sub-index is “particularly weak,” lingering at “record-low”levels, the report read. The sector is still shedding jobs, despite activity recovering. “Unlike the demand and activity indices,[it]  has barely recovered from the sharp plunge in April… The PMI employment indicator suggests that further job losses are likely after an initial hit to employment expected in the second quarter,” the report read.

Respondents are still slightly optimistic about business conditions going forward. The sub-index rose above 50 points in July, it’s best level this year. But this reading is still low compared to the long-term average of about 60 points. Source (News 24)