SA’s Absa PMI expands rapidly in February

South Africa's Absa Purchasing Managers' Index (PMI) expanded rapidly in February, reaching 53 index points, up from 50.9 in the previous month. The increase was driven by factors such as the easing of lockdown restrictions, fewer episodes of load shedding, and increased optimism among purchasing managers. Miyelani Maluleke, Economist at ABSA Corporate & Investment Banking, emphasized the positive impact these factors had on the manufacturing sector. The improvements seen in February suggest a potential growth recovery in the near term. However, concerns remain regarding the possibility of a third wave of COVID-19 and its potential impact on the economy. Maluleke highlighted the importance of ongoing support for the manufacturing sector, particularly from strong export commodity prices and the performance of the mining sector. While the agricultural sector plays a vital role in the economy, its growth may not significantly impact overall GDP due to its relatively small share. Nonetheless, continued growth in agriculture could have positive spill-over effects on other sectors of the economy. Amidst various risks such as a potential third wave of COVID-19 and electricity challenges, the recent move to ease lockdown restrictions to level one is expected to have a limited impact on manufacturing output. A sustained and durable economic recovery will depend on minimizing the risk of further lockdowns and implementing policies to support long-term growth. ABSA's house view aligns with national treasury projections of a 3.1 percent GDP growth this year, indicating a slow but steady recovery post-pandemic. Looking ahead, Maluleke emphasized the need for continued implementation of economic reforms and initiatives such as Operation Vulindlela and the Africa Continental Free Trade Area to drive long-term growth. While these efforts show promise for future improvements, tangible results may take time to materialize. Overall, South Africa's manufacturing sector has shown resilience amidst challenging economic conditions, with optimism for further growth in the medium to long term.