2 May 2017 – BUSINESS sentiment in South Africa’s manufacturing sector slipped sharply in April, according to a key survey released on Tuesday.
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) slumped last month after a solid performance during the first quarter of 2017. The index fell to 44.7 index points from an average of 51.9 during the first quarter.
The PMI is an indicator of the economic health of the manufacturing sector with the purpose of providing information about current business conditions to company decision makers, analysts and purchasing managers.
It is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
Absa said the decline was relatively broad based, with key subcomponents measuring business activity and inventories slumping to multi-year lows.
The survey suggested that the sector experienced a rough start to the second quarter of 2017. The new sales orders index declined sharply in April, pulling along business activity.
Absa said the 8.3-point fall in orders was likely driven by the expectation of weaker demand from local customers, as respondents still noted an improvement in export orders.
This was the first full survey after the recent Cabinet reshuffle, which saw Pravin Gordhan fired as finance minister, and subsequent sovereign credit rating downgrades.
Absa said it was likely that respondents now anticipate economic growth and domestic demand to be weaker than before. As such, they have likely scaled back expectations for orders and activity growth going forward. – ANA