Seifsa ‘cautiously optimistic’ following improved PMI

02 November 2017

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) is “cautiously optimistic” about the sector’s performance, in light of data released by the Absa Purchasing Managers’ Index (PMI),  which indicates an improvement in activity in the manufacturing sector.

This was the third consecutive increase and brought the index to its best level since the dip in June 2017.

“The PMI is the first data point for the preceding month and it is very important in setting the tone for how producers and relevant stakeholders in the manufacturing sector view the month. Although it has been trending below the neutral 50-point mark for the fifth consecutive month, the fact that it has been slowly improving for the better part of the period is encouraging,” said Seifsa chief economist Michael Ade.

He indicated that Seifsa was apprehensive about whether the trend would continue, owing to the prevailing political uncertainty. The overall year-to-date PMI data has had a volatile few months, mostly due to political turmoil. The volatility is expected to continue until the end of the year.

“The ambiguity in the Finance Minister’s Medium-Term Budget Policy Statement, and its lacklustre reception, coupled with the negative impact on the rand, further heighten the degree of uncertainty. The fluctuation in the index encapsulates the absence of normality and a ‘business-as-usual’ scenario in the metals and engineering (M&E) sector, making it even more difficult to plan in the short term,” observed Ade.

The latest composite seasonally adjusted headline PMI increased by 2.9 points to 47.8% in October 2017, with all five major seasonally adjusted subcomponents increasing in October when compared with the previous month. Of the five subcomponents, the new sales orders index increased the most, surging to 49.9 in October 2017 from 43.2 in September 2017. This was followed by an increase in the business activity index (45 index points), buoyed by an improvement in demand and output.

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