The Absa Purchasing Managers Index (PMI) bounced back above the neutral 50-point mark to 51.5 in May after having slumped to 44.7 in April.
While the index recovered from most of April’s losses, the manufacturing PMIs needed to be seen in context of the “extremely negative sentiment” under which April’s survey was conducted following the damaging Cabinet reshuffle and ratings downgrades, said BNP Paribas Securities South Africa economist Jeffrey Schultz.
“The new sales orders index rose to 54.1 in May. This was not only sharply better than the dismal 44.4 recorded in April, but also above the first-quarter average of 52.9. The improvement helped lift the business activity index back above the neutral 50-point mark to a solid 52.3 points in May,” said the Bureau for Economic Research.
The business activity index recorded 37 points in April.
However, despite the improvement in demand and activity, the employment index declined from 50.3 points in April to 47.4 points in May.
Meanwhile, inventory levels increased from 41.3 points in April to 49.7 points in May.
The purchasing commitment index, despite rising to 44 points in May, from 35.9 in April, had not recovered to the same levels as the other indices.
The PMI price index registered a marginal slip from 69.9 in April to 68.3 in May.
“While we are encouraged by the fact that the index has climbed back into expansionary territory, we caution that the PMI prints, which averaged above 50 throughout the first quarter of this year, did not translate into an improved manufacturing production performance in the quarter,” Schultz warned.
He expected the sector’s performance to remain subdued over the medium term as domestic demand remains weak and political uncertainty looks set to prevail.
