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The renewed blockades in Europe appear to have a negative impact on South African export demand.
- ABSA’s Purchasing Managers Index for November, which measures economic activity in the manufacturing sector, has fallen to the lowest level since July.
- The drop indicates that a recovery in South Africa’s manufacturing sector is beginning to lose momentum.
- While sustained growth in demand is necessary to further boost production, renewed closures in Europe appear to have a negative impact on exports.
The recovery in South Africa’s manufacturing sector is starting to lose momentum, data shows.
The ABSA Purchasing Manager’s Index (PMI) for November, which measures economic activity in the manufacturing sector, was released on Tuesday.
A figure above 50 indicates an increase in activity, while a figure below 50 indicates a decrease in activity.
The PMI for November fell to 54.6 points on the index from 60.9 points in October. “The drop comes after three consecutive upward movements and brings the index to the lowest level since July 2020,” the report reads.
“While still indicating an improvement in business conditions, the decline suggests that the recovery in the manufacturing sector is beginning to lose momentum.”
The decline was expected, with certain subsectors approaching pre-closing levels. To further boost production, sustained growth in demand is needed.
New sell orders, an indicator of demand, fell to 49 index points, below the neutral mark of 50 points. “This is partly due to a further drop in export sales, which could be linked to a drop in activity in Europe amid tighter closures,” the report read.
There is also less optimism domestically about future business conditions, driven by Covid-19 concerns. The indicator of trading conditions in six months fell to 52.7 points. “While the positive news regarding vaccine development may result in a better global growth outlook in the medium term, the next six months remain highly uncertain.”
The employment indicator, for its part, fell to 47.2 points in November, compared to the 49.1 points registered in October. This indicator has not been able to exceed the 50-point mark since April, when the lockdown was in full force.
