After the encouraging uptick in July, the seasonally adjusted PMI dropped significantly by 8.8 points to 43.6 in August, down from 52.4 in July.
This decline underscores the challenges the sector faces amid ongoing political uncertainty, high but slowing inflation, elevated borrowing costs, and sluggish demand both globally and domestically.
These factors have hampered the sector’s ability to maintain the momentum seen in July, leading to the fifth month in 2024 where the PMI has fallen into contractionary territory.
Key findings from the Absa Purchasing Managers’ Index (PMI) for August 2024 include:
* Declining Business Activity: The business activity index dropped sharply by 11.9 points to 38.9 in August, a significant reversal from July’s expansionary phase.
* Weakening Demand: New sales orders plunged to 34.6 points, reflecting a slowdown in demand following the previous month’s gains. Many respondents highlighted weaker domestic sales and orders, while export sales also contracted, likely due to supply chain issues and weak economic performance in key markets like Europe and China.
* Improved Supplier Performance: The index measuring supplier performance improved by 4.5 points, indicating reduced pressure on suppliers, possibly due to the decrease in new orders.
* Ongoing Employment Challenges: The employment index continued its decline, remaining in contractionary territory for the second consecutive month, influenced by the sector’s volatile activity levels.
* Stable Cost Pressures: The purchasing price index remained relatively unchanged, aligning with market expectations and recent inflation data, which suggest that inflation has peaked. Stable oil prices and a stronger currency contributed to a slight decrease in fuel prices at the beginning of August, with more significant cuts expected in September.
* Optimistic Yet Cautious Outlook: Although the index tracking expected business conditions in six months’ time decreased to 61.3 points in August from 69.4 in July, it remains at a relatively high level, signaling an anticipated improvement in business conditions going forward.
As the manufacturing sector navigates these turbulent conditions, the implications for economic recovery and policy direction are significant.