Manufacturers' input cost pressures eased in June, with the Bureau for Economic Research (BER) saying lower oil prices following the easing of tensions in the Middle East had contributed to a sharp decline in the purchasing price index.
The purchasing price index in the seasonally adjusted Absa Purchasing Managers' Index (PMI) fell by 13.5 points to 71.3 in June from 84.8 in May, according to the BER survey sponsored by Absa.
The survey was conducted after the United States and Iran signed a memorandum of understanding to end hostilities in the Middle East and reopen the Strait of Hormuz, leading to a significant decline in the Brent crude oil price.
The BER said lower crude oil prices, a relatively strong rand and diesel price reductions had all contributed to easing purchasing costs, although respondents continued to cite diesel prices as a constraint.
Despite the improvement in input costs, the headline PMI fell from 50.8 in May to 47.3 in June, indicating contracting business conditions. The new sales orders index declined to 40.6 from 44.6, with some respondents reporting that customers had postponed purchases in anticipation of lower prices.
Manufacturers also reduced inventory levels during the month, with the inventories index falling below the neutral 50-point mark to 49.0. The BER said purchasing managers appeared to be delaying restocking while waiting for prices to decline further.
Supplier deliveries remained slower than normal, with the supplier deliveries index at 60.0 in June. Because the index is inverted, the BER said the reading suggested supply chains had not yet normalised despite the easing of geopolitical tensions.
Business sentiment nevertheless improved, with the expected business conditions index rising from 52.9 in May to 56.6 in June as tensions in the Middle East eased.
