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Absa April PMI shows surprising employment bounce

Absa April PMI shows surprising employment bounce
South African currency. (Photo: Simon Dawson / Bloomberg)

The Absa Purchasing Managers’ Index had a slight dip in April, but don’t let the wobble detract from the good news. For the first time since early 2012, all five sub-indices are in positive territory above the neutral line of 50. And in a sign that is as surprising as it is encouraging, the employment index surged 10 points to its highest level since 2007.

Overall, the Absa Purchasing Managers’ Index (PMI) dropped to 56.2 in April from 57.4 in March. But the bigger picture is much brighter than these stats would normally suggest. For one thing, the Absa PMI is about 26 points above the levels it crashed to in April 2020, SA’s strictest lockdown month. And all five subcomponents are in positive territory for the first time in more than nine years. 

The biggest jolt came from the employment index, which has generally been the laggard. It leapt 10 index points to 54.4. 

“The most surprising outcome of the April PMI survey was the surge in the employment index, especially as the business activity index lost some ground,” Absa said in a statement. “While the increase is encouraging, it is way too early to tell whether this points to a sustained improvement in job creation in the manufacturing sector.”

This is a space to watch in coming months — it may be a one-off blip, or it could be the start of a positive trend. Generally, the employment data has been grim. 

The unemployment rate in the fourth quarter of 2020 hit a record high of 32.5%, while the expanded definition, which includes discouraged job seekers, was 42.6%. The next quarterly labour force survey, which gives the unemployment reading, is due on 1 June and will cover the first quarter of 2021. The data from the quarter have been mixed, but there is a good chance the economy contracted in that period, which does not bode well for job creation. 

However, expectations are that the economy will pick up steam this quarter, which began on 1 April. So the latest Absa PMI may be an indication that this is indeed the case. The PMI is based on a monthly survey of purchasing managers in the manufacturing sector. They specify each month whether a certain activity, such as employment or new sales orders for their company, has increased, decreased or remained unchanged. 

This makes it a good barometer of the health of the manufacturing sector, which is regarded as crucial because of its potential to create jobs and boost export earnings. DM/BM

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