Absa’s Purchasing Managers’ Index (PMI) dipped in September to 56.8 from 57.9 in August. This stability follows some wild swings: the PMI plunged almost 14 points to 43.5 in July, underscoring the damage inflicted by the riots and looting that swept KZN and Gauteng that month. In August it roared back into positive territory, well over the neutral 50 mark. 

While the overall index moved only slightly, there was some volatility among the sub-indices. The business activity index fell almost five points to 53.8 in September. 

“In terms of the quarterly average, the business activity index measured 46.3 points in Q3 2021, down notably from just more than 55 in the second quarter. The weaker activity levels in Q3 are in line with the trend in the Absa quarterly manufacturing survey and suggest that the manufacturing sector is likely to be a drag on the quarterly GDP momentum in the third quarter,” Absa said. 

So this is the latest indicator to strongly suggest that the economy contracted in Q3, setting the fragile recovery back even further after 2020’s revised GDP contraction of 6.4%. 

The employment index rose to 48.6 in September from 47.1 in August. But it remains stuck below the neutral 50 mark. 

“This continues to suggest a lacklustre factory-sector job market. Unfortunately, the looting shock in July may result in more job shedding, especially in KwaZulu-Natal,” Absa said. 

With the unemployment rate at a record 34.4% and an economy which probably contracted in the past quarter, this bodes ill for job creation in the manufacturing sector.  

The Absa PMI is derived from monthly surveys of purchasing managers in South African manufacturing, and is a key barometer of the sector’s health. DM/BM