Business Maverick

PURCHASING MANAGERS’ INDEX

Manufacturing sector rebounds in May after devastating KZN floods, load shedding

Manufacturing sector rebounds in May after devastating KZN floods, load shedding
Ship-to-shore cranes and shipping containers stacked dockside at the Port of Durban. May saw exports return to positive territory following disruptions to Durban port caused by heavy flooding in the city. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

The month-on-month rebound was largely expected after the Absa Purchasing Managers’ Index lost more than nine points in April on the back of the devastating flooding in KwaZulu-Natal, while intense load shedding hurt output and demand. 

After three months of gains to March and a slide in April, the Absa Purchasing Managers’ Index (PMI), which measures confidence in the manufacturing sector, inched up 4.1 points to 54.8 in May. 

Miyelani Maluleke, the chief economist at Absa Corporate Investment, Banking says the month-on-month rebound was largely expected after the index lost more than nine points in April on the back of the devastating flooding in KwaZulu-Natal, while intense load shedding hurt output and demand. 

However, the index did not recover all the ground lost (the PMI stood at 60 in March) and the average for the first two months of the second quarter is almost six points below the average recorded in the first quarter. 

“Indeed, the average for the business activity index for April and May is well below 50, which suggests that actual manufacturing output may record a quarterly contraction in the second quarter,” he says.

Gupta lawyers bow out as IDC’s R287m fight against Oakbay rolls into year five

During May, domestic demand conditions normalised following the flooding, while export sales also returned to positive terrain. This suggests that last month’s deterioration on the export front was mainly caused by the Durban port disruptions rather than signalling the start of a drop in global demand for South African goods. 

Despite the solid rebound in demand, business activity remained stuck just below the neutral 50-point mark in May. This could be due to continued load shedding and industrial action affecting output but not necessarily weighing on demand. 

Maluleke says the further downtick seems to mirror what is happening globally. Input cost inflation measures from the flash PMIs for the US and Europe also showed a moderation in May as raw material inflation seemed to be cooling. However, as is the case in South Africa, the levels remain high, signalling that while it may have peaked for now, (global) input cost pressure remains significant. DM/BM

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

Daily Maverick Elections Toolbox

Download the Daily Maverick Elections Toolbox.

+ Your election day questions answered
+ What's different this election
+ Test yourself! Take the quiz