Overall business activity in the manufacturing sector, as captured by the headline Absa Purchasing Managers’ Index (PMI) for August, provides some level of reassurance to companies in the Metals and Engineering (M&E) sector, according to Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist Michael Ade.
He said the PMI’s performance in August, despite a tough domestic operating environment, provided insight into the improving perception held by company executives as they aimed to further improve on production with the easing of Covid-19 restrictions.
“The leading indicator, which acts as a preview to industrial activity before it happens, is slowly picking up and provides a basis for businesses to use excess capacity, boost production and increase overall contribution to economic growth. Correspondingly, the increase in the PMI is important in influencing how producers and relevant stakeholders in the broader manufacturing sector view the coming month, enabling them to confidently place orders in advance.”
The latest seasonally adjusted preliminary PMI data shows the composite PMI increasing to 57.3 points in August, from 51.2 points in July.
“It is important for companies to build on the encouraging signs of green shoots in industrial activity to improve their chances of survival and maintain existing jobs,” he said.
It was however crucial that industry stakeholders and policy makers jointly addressed the issues that may constrain short-term growth drivers, such as trade and logistical issues relating to the pandemic, in order to limit their effect on people and the economy, he added.
“Trade determines the demand for a commodity and the over-arching challenge of poor demand can only be addressed through increased inter- and intra-industry trade. This implies that more attention should be directed at improving logistical constraints and boosting supplier deliveries in the M&E value chain towards improved trade. For perspective, supplier deliveries carry the highest weighted average (0.40) of all the sub-PMI indices, highlighting the importance of having a functional logistics process towards boosting supply chain activities and trade in the M&E sector.”