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PMI Edges Higher To 50.9 In January

3 February 2021 – The seasonally-adjusted Absa Purchasing Managers’ Index (PMI) has edged up slightly to 50.9 points in January, from 50.3 in December.

While higher month-on-month, the January reading is still much lower than the average recorded in the last quarter of 2020.

Specifically, financial services provider Absa says the business activity index has declined for a fourth consecutive month, which points to a further loss in “recovery” momentum.

The bout of load-shedding in mid-January may also have weighed on production, while the adjusted Level 3 lockdown regulations would have negatively affected production in the liquor and hospitality-related industries.

Absa adds that the renewed increase in the supplier deliveries index, which is indicative of supplies being less readily available, suggests possible supply chain disruptions in January. This is likely not only owing to local restrictions, but also prevailing tight lockdown regulations in the rest of the world.

On a positive note, Absa says the new sales order index rose by two index points to 47.2 in January, despite a further deterioration in export sales, suggesting that new sales orders were supported by a reduction in the rate of decline in domestic demand instead.

Even with the uptick, the level of the index continues to point to constrained demand conditions.

The bank reports that purchasing managers did turn more optimistic about the operating environment going forward. The index tracking expected business conditions in six months’ time rose to 59.2 index points, from 52.9 in December.

This might be linked to prospects of an improved global economy during the second half of the year, which should boost exports.

The purchasing price index increased sharply in January, pointing to a reacceleration in cost pressures for manufacturers.

This was driven by a weaker rand exchange rate and higher Brent crude oil price compared to the previous month.

A hefty fuel price increase due on February 3 could put further pressure on costs in February. (Source) Engineering News