The Absa Purchasing Managers Index (PMI), a key gauge of manufacturing activity, slid to 43.6 points in January from 50.9 in December. This takes it back into negative terrain as 50 is the neutral level.

How bad is the reading? According to Absa, it’s very bad.

“Outside of the global financial crisis in 2008/09 and the pandemic-induced lockdown period of 2020, the index has only fallen to this low level a handful of times,” the bank said in a statement.

This is one of the very first reads of economic activity for 2024, and this suggests that the manufacturing sector — and by extension the wider economy — has started the year on a sour note.

Given that the economy may have tipped into a recession in the final quarter of 2023 after contracting 0.2% in Q3, this is very indeed very bad.

“Following an encouraging uptick in December, the business activity index plunged to 37.1 index points in January. The deterioration was despite relatively less load shedding in January compared to most of 2023,” Absa said. “The decline in output was likely driven by a sharp decline in demand as the new sales orders index fell to 37.2 index points.”

While the lights may have stayed on longer, the logistical meltdown at the ports appears to have erased any production gains that may have been wrought as a result.

“A lack of materials and goods required in the production process may have …  held back output. The inventories index declined once more, to 37.7 in January, and reached the lowest level since mid-2020,” Absa said.

All in all, it’s quite a dismal read.

South African economic growth is forecast by the World Bank, IMF and domestic institutions to pick up some pace this year with rates generally pegged at between 1.0% and 1.5%, which is still pretty sluggish.

The latest Absa PMI print signals that the rebound has not yet started and that the mounting challenges posed by the unfolding failure of the state remain a serious constraint on growth, investment and job creation. DM