Absa's Purchasing Managers Index drops to 48.1 points

The seasonally adjusted Absa Purchasing Managers Index took a dip by 4.5 points in November 2024, signaling a loss of momentum in the recent recovery trend. Andiswa Nondudule, Economist at Absa CIB, expressed disappointment over the decline after two months of the index being above 50. The key drivers behind this downturn were lower business activity levels and new sales orders, both dropping below the 50 neutral mark significantly. These factors played a significant role in dragging down the overall PMI. When asked about the sustainability of the improvement in global demand and its impact on South Africa's manufacturing sector, Nondudule highlighted the uncertainty surrounding the global environment. With global volatility heightened by the re-election of Donald Trump as the US President, uncertainties loom over South Africa's manufacturing landscape. Trump's vocal stance on trade adds another layer of complexity that could affect domestic and global trade scenarios. The discussion then shifted to local challenges, particularly focusing on supply deliveries and the logistical hurdles at South African ports. Nondudule acknowledged the disruptive nature of these logistical challenges on the supplier index, with delays and disruptions causing strains. While some easing is observed due to improvements in logistics, it remains unclear whether this is solely due to improved infrastructure or reduced manufacturing activity levels. Monitoring these factors will be crucial in determining the longevity of the supply chain improvements. Cost pressures in the manufacturing sector witnessed an uptick in November, attributed to a weaker Rand and fuel price hikes during the month. The implications of these inflationary pressures could impact production costs and overall economic outlook. Moreover, with global political uncertainties, especially stemming from the US, manufacturers in South Africa face a challenging landscape. Trump's policies and focus on trade could have far-reaching consequences on South Africa's business conditions. Consequently, monitoring global political developments along with domestic factors like inflation, interest rates, and electricity stability will be paramount for manufacturers moving forward. In conclusion, while the recent decline in the Absa Purchasing Managers Index paints a challenging picture for South Africa's manufacturing sector, there are glimmers of hope with improvements in local conditions. Nondudule's insights shed light on the complex interplay of global and domestic factors shaping the manufacturing landscape. As the sector navigates through uncertainties, a vigilant approach towards monitoring key indicators and adapting to evolving conditions will be essential for sustained growth.