South Africa’s manufacturing activity rebounded in April on the back of a full month of no load-shedding and possibly due to an improvement in port congestion.
According to the Bureau for Economic Research’s Weekly Review, the seasonally adjusted Absa Manufacturing Purchasing Managers Index (PMI) surged to 54 in April, up from 49.2 in March, signalling a renewed expansion in factory activity.
“The rebound comes from improved business activity, while better domestic demand filtered through to higher new sales orders. A full month of no load-shedding was likely positive for sustained business activity. The continued efforts to solve the port issues may have also had a positive impact,” the BER economists said.
However, cost pressure due to rising fuel prices remains a challenge. Petrol prices increased by 37 cents in May to the highest level since October 2023, while diesel prices, an important input cost for manufacturers, decreased by 30-36 cents, but still remain high.
“Domestic new car sales surprisingly ticked up by 2.2% year-on-year (y-o-y) following eight straight months of declines. More trading days relative to April 2023 may have helped with the increase,” the economists noted.
“While welcome, car demand will remain suppressed in an environment with sticky inflation, high interest rates, and higher fuel prices. Worryingly, export sales slumped by 23.9% y-o-y from a high base set in April 2023.”
Meanwhile, South Africa’s trade balance surplus edged down to R7.3 billion in March, below a Reuters poll for a surplus of R15bn.
“This is almost half the downwardly revised surplus of R13.3bn recorded in February. The narrowing was due to the rise in imports of 6.1% month-on-month, while exports grew by just 1.8%,” the economists said.
The country also recorded a budget surplus of R2.1bn in March, compared to a deficit of R56.27bn in the same month last year.
According to the South African Reserve Bank, credit extension to the private sector grew by a faster-than-expected 5.2% y-o-y, up from 3.3% in February. This was mainly driven by higher corporate credit extension as credit extended to households slowed further to a three-year low of 3.7%.
