The Absa Purchasing Managers’ Index (PMI) is a survey that measures the expectations of purchasing managers in the manufacturing sector, with 50 being the “neutral” threshold. In April it had fallen almost as low as it could go, to 5.1, against the backdrop of the economic collapse sparked by the first full month of hard lockdown in the attempt to contain the Covid-19 pandemic. 

It has since been picking up as lockdown measures gradually eased. Absa said on 1 October that it had risen to 58.3 from 57.3 index points in August. But there are lots of caveats. 

“The shift to a lower lockdown level mid-month likely drove the further improvement in business conditions in the local manufacturing sector. However, as cautioned in August, the fact that the level of the PMI is now above pre-pandemic levels does not directly translate to official manufacturing activity being back to pre-pandemic levels. Due to the month-on-month comparison asked for in the PMI questionnaire, the high level merely means that conditions continue to improve,” Absa said in a statement. 

Then there is the issue of employment, which has become a persistent theme. Of the six indices that comprise the index, the employment index is the only one that remains below 50. It rose in September to 44.5 from 39.0 in August.  

Absa said this “still points to lower employment, but suggests that the pace of retrenchments slowed. Statistics South Africa’s Quarterly Labour Force Survey showed that the sector lost 185,000 formal-sector jobs in the second quarter.”

This remains a major cause for concern. The broad definition of unemployment in South Africa, which includes discouraged job seekers, climbed over two percentage points in the second quarter to 42%, even as the rate under the standard definition declined purely because of technicalities related to lockdown. 

Unemployment is perhaps the most pressing social challenge in South Africa and is a reflection of the economy’s abysmal state. In addition, the manufacturing sector has long been seen as a crucial generator of jobs. Until the PMI’s employment index indicates job creation, there will be little to celebrate from this data. DM/BM