Business Maverick

South Africa

Absa PMI dips in October as steel strike, load shedding dent sentiment

(Illustrative image | Source: Adobe Stock)

The Absa Purchasing Managers’ Index stumbled again in October, declining to 53.6 from a downwardly revised 54.7 in September. This suggests a faltering start to the fourth quarter (Q4) of 2021, a period in which the economy is expected to be rebounding from a probable contraction in the previous quarter. 

Absa said in a statement that two negative factors weighed on sentiment: the three-week Numsa strike in the steel and engineering sector and the return of load shedding on a significant scale.

Not all manufacturing sectors were directly impacted by the steel strike, but Absa noted that an “almost 5-point decline in the new orders index to below the neutral 50-point mark suggests that the demand for manufactured goods suffered a meaningful knock in October”. 

“With the demand for and the output of manufacturing goods under pressure in October, it is no surprise that the employment indicator remained stuck below the dividing line of 50,” Absa added. That means that there is little in the way of job creation in the manufacturing sector against the backdrop of a 34.4% unemployment rate at last count. The business activity sub-index also remained below the neutral 50 mark.

Positive developments in the month have included eased lockdown restrictions and the sharp decline in Covid-19 cases. 

Overall, the index — which ranges from zero to 100 — at 53.6 remains in positive territory, but only by a small margin. On a report card, such a mark won’t get you into Oxford. 

It is also not clear what is keeping afloat the indices holding the overall index above 50. 

The inventories index rose to 54.4 in October from 50.0 in September. 

“Besides manufacturers gearing up to meet festive season demand, it is not immediately clear what would have driven the increase,” Absa said. 

It’s also uncertain at this point just how “festive” the season will be if South Africa enters a fourth wave of infections before then. DM/BM

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