Manufacturing activity in South Africa enjoyed a robust month in November following the end of the 12-day strike by Transnet workers as export sales improved significantly.
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose firmly back into expansionary terrain in November, lifting to 52.6 points from 50 points in October.
This was the highest PMI reading since May, as business activity and new orders improved for the second month in a row.
On its own, Absa said this suggests that the manufacturing sector could book another slight expansion in the fourth quarter.
However, Absa said that next week’s official data on factory production in October – and the extent to which this was impacted by the prolonged strike at Transnet – would help to firm up this view.
The business activity sub-index lifted to 49.5, from 48.8 logged in October, while new sales orders moved into expansionary territory for the first time since May.
Indeed, export activity picked up month-on-month following disruptions caused by the Transnet strike in October, which led to Transnet Port Terminals declaring a force majeure.
Even though it improved, the new sales orders activity index remained stuck just below 50 points, while the employment index also lingered at a much lower level.
The weakening global growth situation continues to impede export potential, notwithstanding November’s more favourable performance.
Absa senior economist Miyelani Maluleke said it was encouraging that both business activity and new sales orders improved for a second straight month after both had plunged lower during the heavy load-shedding month of September.
“As cautioned in the past, higher demand and output levels would likely need to be sustained for some time for any improvement in staffing levels to occur,” Maluleke said.
“Encouragingly, purchasing managers turned more upbeat about business conditions going forward. The index tracking expected business conditions in six months’ time rose to 51.7 from 49.2 in October.”
Meanwhile, the purchasing price index remained largely unchanged in November, corresponding to price pressure at the start of the production process remaining elevated.
Absa said the recent decline in the Brent crude oil price as well as a somewhat stronger rand exchange rate bode well for the general downward trend to continue through the final month of the year.
However, Investec economist Lara Hodes said load shedding, which necessitated the frequent usage of diesel-powered generators, added to the cost burden of producers.
“The purchasing price index reading remained largely flat in November, having come down markedly from earlier in the year,” Hodes said.
“However, persistent load shedding, with producers having to run expensive diesel-powered generators, continues to weigh heavily on their overall cost base.
“We are, however, expecting a marked diesel price cut in December, which should provide some reprieve.”
BUSINESS REPORT