Business Maverick


Absa PMI falls further into negative territory in May

Absa PMI falls further into negative territory in May

The Absa Purchasing Managers Index (PMI), a key barometer of confidence in the manufacturing sector, declined in May to 49.2 from 49.8 in April. This signals that manufacturing output in Q2 is contracting after an expected small bounce in Q1.

The decline in May was the fourth consecutive month that the index “signalled a deterioration in business conditions”, Absa said. It also takes it further into negative territory, as 50 is the neutral level. 

“In all, the average index level of business activity in the first two months of the second quarter is below the first-quarter average. This suggests that the sector may once again detract from quarterly GDP growth after an expected expansion in the first quarter,” Absa said.

Economists expect that the economy grew a very moderate 0.2% in Q1 of this year, according to the median estimate of a Bloomberg forecast in mid-May, after contracting 1.3% in the final quarter of 2022. That would at least avert a recession, defined as two consecutive quarters of economic contraction.

The PMI is now indicating that any growth in the manufacturing sector in the first three months of this year has now faded and that production may now be in decline in the face of the surge in power cuts.

The outlook among purchasing managers in the sector is bleak, to say the least.

“The index tracking expected business conditions in six months’ time fell to 43.7 in May, from 51 in April. This is the most pessimistic respondents have been about the near-term outlook since the strictest phase of South Africa’s Covid lockdown three years ago,” Absa said.

That’s quite a shock. The outlook is worse now than it was when the economy was imploding under the weight of the “Great Lockdown”, and the unfolding power crisis is almost entirely to blame.

“Eskom confirming earlier concerns about the possibility of higher stages of load shedding during winter likely contributed to the souring in sentiment,” Absa noted.

Indeed, Stage 8 will take the industry and wider economy into murky territory.

The employment index was changed at 45.6. With an unemployment rate of almost 33%, it is deeply concerning that it remains stuck well below 50. Jobs are simply not being created in this bleak environment.  

The PMI is the latest indicator to suggest that the economy is simply failing to grow, or at least at anything approaching a meaningful rate. If the power cuts reach Stage 8 – or worse – this month, expect the June index to fall deeper into negative territory. DM


Comments - Please in order to comment.

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


This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.

Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

[%% img-description %%]

The Spy Bill: An autocratic roadmap to State Capture 2.0

Join Heidi Swart in conversation with Anton Harber and Marianne Merten as they discuss a concerning push to pass a controversial “Spy Bill” into law by May 2024. Tues 5 Dec at 12pm, live, online and free of charge.

A South African Hero: You

There’s a 99.8% chance that this isn’t for you. Only 0.2% of our readers have responded to this call for action.

Those 0.2% of our readers are our hidden heroes, who are fuelling our work and impacting the lives of every South African in doing so. They’re the people who contribute to keep Daily Maverick free for all, including you.

The equation is quite simple: the more members we have, the more reporting and investigations we can do, and the greater the impact on the country.

Be part of that 0.2%. Be a Maverick. Be a Maverick Insider.

Support Daily Maverick→
Payment options