2 September 2020 – Conditions in the manufacturing sector improved further last month and rose above pre-pandemic levels as Covid-19 lockdown restrictions were relaxed to Level 2.
The Absa Purchasing Managers’ Index (PMI), compiled by the Bureau for Economic Research (BER), today posted a robust increase to 57.3 index points in August, up from 51.2 in July.
Manufacturing activity crashed in April, but subsequently recorded strong monthly increases in May and June as foretold by the uptick in the PMI’s activity index in those months.
The PMI suggested that the recovery stalled in July, but likely found renewed momentum in August.
Absa said both business activity and new sales orders rose in August.
The bank said the improvement in demand was not only due to South Africa moving to a lower lockdown level, but was also supported by an uptick in export orders.
It said while the level of the PMI was now well above pre-pandemic levels, this was unlikely to be the case when the actual manufacturing activity data for August is released later.
“Given the magnitude of the drop recorded in April, and the continued restrictions placed on the manufacturing sector until recently, as well as social distancing measures possibly still preventing many factories from returning to full capacity currently, it will take months of strong month-on-month growth to return to the actual level of activity recorded prior to the start of the nationwide lockdown in late March,” Absa said.
Absa said production levels in some subsectors may indeed be back in August, but overall activity was likely to still be lower.
The employment index remained significantly more subdued, underscoring the point that the uptick in activity was not resulting in output that exceeds current production capacity.
The inventories and employment indices continued to be the main drag on the headline PMI.
Absa said the renewed increase in the PMI in August was encouraging, especially as it seemed to be supported by both local and export demand improving.
“Furthermore, purchasing managers have turned notably more optimistic about future business conditions,” it said.
“The index tracking expected business conditions in six months’ time rose to the highest level in about 18 months.” Source (Business Report)