The seasonally adjusted Absa Purchasing Managers’ Index (PMI) slipped back to below 50 points in March 2024 but there are some signs in the data reflecting that local port efficiency may be improving.
The headline index released on Tuesday declined from 51.7 in February to 49.2 in March. The PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research and sponsored by Absa.
The PMI has been choppy in recent months, but the average for the first quarter of this year is equal to the final quarter of last year. In the fourth quarter, the gross value added by the sector managed to eke out a 0.2% quarter-on-quarter expansion.
The PMI generally suggests a similar experience is possible in the first quarter.
“Following a surprisingly robust increase in February, the business activity index dropped back in March. The activity has been volatile of late, but if one considers the average of the first quarter of 2024 relative to the fourth quarter of 2023, the activity index is slightly down,” the PMI noted.
“The new sales orders index declined to 45.5 index points in March. Respondents commented on demand remaining weak. Furthermore, following an improvement in February, the export sales index fell once more in March.”
Survey respondents suggested that demand conditions were sluggish.
However, a potentially more positive development was the steep decline in the supplier deliveries index. The index declined from 62 to 54.1. The reason for this being potentially positive news is that it could be one of the first signs that congestion at local ports is easing somewhat, and deliveries of (imported) supplies are now coming through faster. This index is inverted, so faster deliveries result in a decline in the index.
This is because faster deliveries during times of uncongested and unconstrained supply chains are generally seen as a negative for the sector as it means suppliers are less busy, due to less demand from other clients, which is why goods are able to get to customers faster.
This could have played some role in March given that demand for manufactured goods weakened, presumably so did demand by manufacturers for inputs. However, given respondents' comments over recent months and other anecdotal evidence, better working supply chains are a more likely reason for the improvement in delivery times. This could, over time, also lift inventories of intermediate goods and raw materials, which ticked down slightly in March.
Another positive development was the further improvement in sentiment towards business conditions in the future.
The index tracking expected business conditions in six months’ time to rise to a solid 62.1 points. This is the most upbeat respondents have been about business conditions going forward since the start of 2023.
However, more concerning is that cost pressure continues to build with the purchasing price index up for a fourth consecutive month. This is likely, to a large extent, driven by increases in the fuel price.
“The recent solid upward trend in the employment index is encouraging. While we tend to caution against reading too much into sudden movements in an index, the employment index has been on a steady increase in recent months. This could bode well for job growth in the sector,” the PMI noted.
