The seasonally adjusted Absa Purchasing Managers’ Index (PMI) started the year on the back foot, declining by 0.9 points to 45.3 points in January 2025.
This is the third consecutive contraction and the lowest level since August 2024. This suggests that the loss of momentum observed at the end of 2024 has not reversed at the start of the year. However, it was encouraging that activity and demand improved from low levels – albeit remaining in contractionary terrain.
The business activity index increased by 3.2 points to 43.5 in January. The slight improvement in activity comes amid signs of recovering demand as the new sales orders rose to 42 points from 37.4 in December. Export sales recovered slightly; however, the index remained below the November level.
Respondents flagged some issues that were hurting production and demand, including trade disruptions with Mozambique due to the political turmoil and fuel shortages affecting air freight.
The upcoming closure of ArcelorMittal’s longs business in South Africa was flagged as potentially impacting some producers over the next six to 12 months.
While activity and orders rose, the other three components of the headline PMI declined. The supplier deliveries index decreased by 6.1 points to 49.9 points, indicating that the delivery times are faster – which could be positive if it points to better working supply chains. However, given the logistics issues flagged by respondents, this seems unlikely and probably points to weaker demand for supplied goods.
Worryingly, the employment index decreased by 2 points to 44.4 and remained in contractionary territory for the tenth consecutive month. Employment contracted during the first three quarters of 2024, and the PMI suggests it will take some time to recover.
Finally, the inventories index declined to 46.5 from 50.7 before.
Reversing a sustained downward trend, the purchasing price index increased by 7.8 points to 68.2 in January. This was due to a weaker rand exchange rate and higher international oil prices, with a fuel price increase at the start of the month. Looking ahead, a further fuel price increase is expected in February.
Renewed cost pressure could (in part) explain why the index tracking expected business conditions in six months’ time decreased by 2.6 points to 64.9 in January. Uncertainties about global trade dynamics could have added to the drop.
That said, despite the fall, the current level indicates that manufacturers remain fairly optimistic about business conditions in the future.