Share
A slight dip for April PMI
Mon, 03 May 2021 10:49:25 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Despite a slight dip in the April PMI to 56.2 points, the manufacturing sector in South Africa remains resilient, significantly outperforming the first quarter average and showing substantial growth compared to the previous year.
- While business activity softened in April, with the sub-index dropping to 50.8, it still indicates expansion in output. Strong new sales orders domestically and internationally are expected to boost output levels in the near future.
- Positive indicators such as rising employment index and favorable global economic conditions bode well for the manufacturing sector, but challenges persist, notably in energy security. Ongoing issues with electricity supply could hinder the sector's recovery.
The Apsis Purchasing Managers' Index (PMI) for April has shown a slight dip to 56.2 points, down from 57.4 in March. Despite this decrease, the index remains significantly above the average recorded in the first quarter of the year and substantially higher than the April 2020 reading when the country was under a strict lockdown. To dissect the nuances behind these numbers, Mielani Maluleke, a macroeconomist at Apsis Corporate and Investment Banking, joined CNBC Africa for an in-depth discussion. Maluleke highlighted that even though there was a modest decline in the PMI, the current reading of 56.2 still indicates a robust performance for the sector. This trend aligns with the overall improvement in activity levels, particularly following a resilient first quarter for manufacturing in South Africa. The softening in the PMI for April can be attributed to a minor decrease in the business activity sub-index, dropping to 50.8 from 56.1 in March. However, it is essential to note that this figure remains above the critical 50-point mark, signifying expansion in output. The decline in output is expected to be temporary, as new sales orders, albeit slightly softened at 58.7, continue to demonstrate strong demand conditions both domestically and internationally. Manufacturers have also expressed optimism regarding export opportunities. Additionally, the employment index within the PMI has risen above 50, hinting at potential job creation in the manufacturing sector. Despite this positive development, Maluleke urges caution in interpreting this data as a sustainable upward trend, stressing the need for further months of consistent readings above 50 to confirm lasting job growth. Looking ahead, Maluleke projects a positive outlook for the manufacturing sector, driven by favorable global conditions, robust performances in mining and agriculture, and their interconnectedness with manufacturing. However, challenges such as energy security remain a key concern. While there have been improvements in the energy availability factor from the state-owned utility, Eskom, issues with the reliability of electricity supply persist. The recent proposal allowing businesses to self-generate up to 10 megawatts of electricity has been met with some appreciation but also skepticism. Business leaders are advocating for an increase to 50 megawatts, citing the high costs and time investments associated with building individual generation capacity. The uncertainty surrounding electricity supply poses a significant downside risk not only to the manufacturing sector but also to the broader economic recovery. Despite positive indicators, the potential for more load shedding in the coming months could potentially impede the sector's recovery. Overall, while the manufacturing sector exhibits resilience, ongoing challenges, particularly in energy security, continue to loom over its growth trajectory.
SIGN UP FOR OUR NEWSLETTER
DAILY UPDATE
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.