Latest news with #AbsaPurchasingManagers'Index
IOL News
11-06-2025
- Business
- IOL News
Manufacturing in dire straits as production plummets 6. 3% year-on-year
The manufacturing sector's poor performance aligns with the Absa Purchasing Managers' Index, which moved further into contractionary territory in April Image: Supplied South Africa's manufacturing production nosedived 6.3% year-on-year in April 2025, worse than economists had expected, although in line with a global slowdown in the production side of most economies. Statistics South Africa released data that showed that food and beverages were hardest hit as a subsector, declining 7.6% and slicing off 1.8 percentage points from the headline figure. This follows an already unfavourable performance in the first quarter, where manufacturing dragged down gross domestic product. Manufacturing was, at one point, considered the backbone of the country's industrialisation efforts and a critical employer of semi-skilled workers. The sector, which accounts for about 14% of GDP, employs about 1.6 million South Africans. Basic iron and steel, non-ferrous metal products, metal products and machinery's decline resulted in a negative contribution of 1.4 percentage points, while the motor vehicles, parts and accessories and other transport equipment sector slumped a staggering 13%, removing another 1.2 percentage points. The petroleum, chemical products, rubber and plastic products division also contracted by 4.7%, further dragging down the overall figure by an additional percentage point. While there was a slight month-on-month increase of 1.9% in April compared to March, the three-month trend shows a 1.4% decrease, with seven out of ten manufacturing divisions reporting negative growth. Investec economist Lara Hodes described the decline as "notable" and worse than a Bloomberg consensus expectation of a 4.5% year-on-year drop. "The decline was broad based, with all sectors except the glass and non-metallic mineral products grouping declining year-on-year," she said. She highlighted that within the food and beverages segment, the beverages and other foods sub-categories were largely responsible for the notable decline. The manufacturing sector's poor performance aligns with the Absa Purchasing Managers' Index, which moved further into contractionary territory in April, said Hodes. Citing the Bureau for Economic Research, Hodes added that 'the index tracking export sales returned to contractionary levels'. Thanda Sithole, FNB senior economist, said 'Operating conditions for domestic manufacturers remain unfavourable'. Statistics South Africa's figures show a picture similar to that of the rest of the world, with Hodes noting that "manufacturing operating conditions globally deteriorated for the first time in four months in April," citing the JP Morgan Global Manufacturing PMI survey. New orders decreased, trade conditions worsened, jobs were cut, and business optimism slumped, JP Morgan found. IOL
IOL News
04-06-2025
- Business
- IOL News
South Africa's economy stagnates with mere 0. 1% GDP growth in Q1, raising concerns
South Africa's economy narrowly escaped contraction in quarter one 2025, with gross domestic product (GDP) growing by a mere 0.1%, down from 0.4% in quarter four 2024, according to Statistics SA/ South Africa's economy narrowly escaped contraction in quarter one 2025, with gross domestic product (GDP) growing by a mere 0.1%, down from 0.4% in quarter four 2024, according to Statistics SA Experts were united in their concerned about stagnation in the economy. Maarten Ackerman, the chief Economist and Advisory Partner at Citadel, said the figures are "not something to celebrate,' as the country remains in a prolonged per capita recession, with full-year growth at just 0.8%. Agriculture, forestry and fishing industry increased by 15.8%, contributing 0.4 of a percentage point to the positive GDP growth. This was primarily due to increased economic activities reported for horticulture and animal products. The transport, storage and communication industry increased by 2.4%, contributing 0.2 of a percentage point. Increased economic activities were reported for land transport, air transport and transport support services. Stats SA said the finance, real estate and business services industry increased by 0.2%, contributing 0.1 of a percentage point. Increased economic activities were reported for retail trade, motor trade, accommodation and food and beverages. The manufacturing industry decreased by 2.0%, contributing -0.2 of a percentage point. Seven of the ten manufacturing divisions reported negative growth rates. The largest negative contributions were reported for the petroleum, chemical products, rubber and plastic products; food and beverages; and motor vehicles, parts and accessories and other transport equipment divisions. Mark Phillips, the head of Portfolio Management and Analytics at PPS Investments, warns that despite agriculture's impressive 15.8% surge, the economy is showing signs of serious strain. Manufacturing is down. Mining is struggling. Fixed investment has dropped. He said, big questions now loom: Is this a fragile win or a warning sign? How much longer can South Africa keep the lights on – economically and literally? This as global risks are intensifying, domestic investment is weakening, and the economy remains vulnerable to another round of load-shedding or global demand shocks. Professor Raymond Parsons, NWU Business School economist, said the disappointing GDP growth figure of 0.1% for the first quarter of 2025 comes as no surprise. 'Although adverse global developments earlier this year have also played a role, the weaker economic data was already apparent before then. For example, the Absa Purchasing Managers' Index for May, although showing some recent signs of business activity and demand improvement, has remained in contractionary territory for seven consecutive months.' Parsons said the key manufacturing sector is likely to continue to be a lagging one for now. 'This reality was already recently also presaged by several reduced growth forecasts for 2025, including by the National Treasury (1.9% to 1.4%) and the SARB (SA Reserve Bank)(1.7% to 1.2%). If present trends persist, the growth outlook for this year now seems likely to be only about 1%, possibly rising to about 1.5% in 2026. It is clear that the incipient economic recovery in SA is presently struggling to gain momentum and needs maximum support to strengthen the business cycle upturn," he said. Waldo Krugell, an economics professor at the North-West University (NWU), pointed to the fact economists were expecting weak GDP data as high frequency indicators like PMIs and monthly manufacturing and mining stats pointed to a slowdown. 'The fact that agriculture, which is a small part of GDP, is again such a swing factor, though to the positive side, shows that there is very little growth happening elsewhere. On the expenditure side it is households driving the little bit of growth that we see. They were spending on transport (those Q1 new vehicle sales showing up), food and beverages, restaurants and hotels, and health,' he said. Krugell added that what is really worrying is the contraction of investment spending. 'International uncertainty did play a role, but we did have exports contributing to growth in Q1. I think the loss of Government of National Unity (GNU) reform momentum played a bigger role.' Call for policy coordination Meanwhile, Dr Eliphas Ndou, an economist and author at Unisa's Department of Economics, said the weak economic growth rate points to an urgent need for policy coordination to raise economic growth. 'The weaker growth implies the economy will be creating jobs at a faster pace leading to persistently high unemployment rate, and also this means elevated gross loan debt to GDP ratio, which National Treasury should deal with through spending reductions. It is ideal that in such periods of elevated policy and trade uncertainty that slow economic growth to implement policies that raise economic agents' optimism,' Ndou said. Ndou added that the slowdown in consumption contributions from 0.7 in the last quarter of 2024 to 0.2 in the first quarter of 2025 is consistent with deterioration in FNB/BER consumer confidence index which declined from -6 index points to -20 index points over the same periods. Wandile Sihlobo, the chief economist at Agricultural Business Chamber of South Africa, highlighted that South Africa's agriculture sector is in recovery mode, although the recovery is uneven, as some subsectors, mainly livestock, are facing challenges that will become apparent later in the year. 'The data released this morning by Statistics South Africa shows that South Africa's agricultural gross value added expanded by 15.8% quarter-on-quarter (seasonally adjusted) in the first quarter of 2025. This expansion is primarily due to the improved performance of certain field crops and the horticulture subsectors,' he said. Sihlobo added that the better performance of these particular subsectors is expected to continue dominating the year. BUSINESS REPORT
IOL News
03-06-2025
- Business
- IOL News
SA's manufacturing activity firmly in contractionary territory in May
The Absa Purchasing Managers' Index (PMI) released on Monday indicated that the seasonally adjusted PMI decreased by 1.6 points to 43.1 in May 2025. Image: Supplied The Absa Purchasing Managers' Index (PMI) released on Monday indicated that the seasonally adjusted PMI decreased by 1.6 points to 43.1 in May 2025. Absa said that the PMI remained in contractionary territory for a seventh consecutive month. The PMI suggests that the manufacturing sector continued to suffer in May, despite some flickers of activity and demand improvement, albeit at extremely low levels. 'However, a decline in the supplier deliveries index pushed the headline PMI lower. The business activity index indicated some improvement, increasing by 3.4 points to 43.4 in May. New sales orders also increased, by 2.2 points to 38.3 in May. This was likely due to domestic demand recovering slightly as export sales continued to deteriorate at a rapid rate.' Absa said the supplier deliveries index has been tricky to interpret since the Covid-19 pandemic. 'Across the globe, the traditional signal of an increase being positive (with the index being inverted, so slower deliveries are seen as a positive sign as they are caused by increased demand for supplies) was no longer valid, as supply-chain bottlenecks and delays, and not higher demand, caused slower deliveries.' The purchasing price index decreased by 7.9 points to 60.4 in May due to fuel price cuts at the start of the month. 'A lower Brent crude oil price and a stronger rand, despite the fuel levy increase, bode well for further fuel price declines at the start of this month.' Absa added that the index tracking expected business conditions in six months' time increased by a significant 13.9 points to 62.5 in May, the highest level since the end of 2024. 'Sentiment improved as global tariffs were suspended, and businesses showed faith that local political disagreements on policy within the government would be resolved.' Investec economist Lara Hodes said, "The slide in the index was partly underpinned by a decrease in the suppliers' delivery index, which fell from 56.6 to 49.0. According to the BER, the decline in the index (the index is inverted so a decline suggests faster deliveries) could technically mean that logistical constraints are easing.' Hodes added that the business activity and new sales orders' indices remained subdued, well below 50, but did pick up modestly in May, despite a continued weakening in export sales. 'Worryingly, the employment index fell further into contractionary territory in May with a reading of 40.0 (42.9 previously). It has been in negative territory for fourteen consecutive months. Hodes said addressing the country's unemployment crisis remains a key imperative of the government. 'However, to achieve this, we need a substantial lift in confidence, driving investment and accordingly economic growth. Purchasing prices declined notably in May by 7.9 points to 60.4, supported by a further cut in fuel prices. Favourably, the index measuring anticipated business conditions (in six months' time) moved back into expansionary territory, reaching the highest level since the end of 2024. It climbed 13.9 points to 62.5.' Dr Eliphas Ndou, an economist and author at Unisa's Department of Economics, said the latest Absa Purchasing Manager Index indicates the manufacturing sector is struggling and is susceptible to weak demand conditions, political and trade uncertainty, which has implications for economic growth and employment outlook in the country. 'The Absa PMI has a statistically strong and positive co-movement with economic growth and is a leading indicator of economic growth. This means an improvement in the indicator would signal an improvement in economic growth. Whilst a weakening in the Absa PMI signals a weakening in economic growth.' Professor Waldo Krugell, an economist at North-West University, said that the PMI is still in contractionary territory and this is worrying for the growth prospects of the economy. 'The expectations are that this week's quarter one growth figures are not going to look good, but the PMI has shown business struggling in April and May as well.' Professor Bonke Dumisa, an independent economic analyst said that he is not surprised about this negative Absa PMI. 'The buyers in most manufacturing companies are usually the most conservative in the business, believing it is safest to adopt a cautious approach and be accused of opportunity cost in case they run short of products. The global uncertainty created by Trump's tariffs, wars and other consequential impacts of his "Executive Orders" have resulted in most buyers becoming very pessimistic about the business conditions. BUSINESS REPORT
The Citizen
02-06-2025
- Business
- The Citizen
Manufacturing PMI falls to lowest level since April 2020 — bad news for GDP
The outlook for economic growth in South Africa is not great, and the new PMI and GDP data is not expected to be great either. Manufacturing PMI fell to its lowest level since the pandemic in May, signalling that the manufacturing sector remains under pressure after a poor start to 2025. This is not good news for the GDP statistics for the first quarter that will be announced on Tuesday, 3 June. The Absa Purchasing Managers' Index (PMI) is an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) and sponsored by Absa. According to the BER, the seasonally adjusted PMI decreased by 1.6 points to 43.1 in May 2025 from 44.7 in April and 48.7 in March. Jee-A van der Linde, senior economist at Oxford Economics Africa, says the headline PMI remained in contractionary territory for a seventh consecutive month. 'This suggests that the manufacturing sector continued to suffer in May, despite some flickers of activity and demand improvement, albeit at extremely low levels. However, a decline in the supplier deliveries index pushed the headline PMI lower.' ALSO READ: Manufacturing PMI for April shows deteriorating SA economy Modest increase in business activity and sales orders The business activity and new sales orders indices rose modestly in May, likely driven by an uptick in domestic demand as export sales continued to deteriorate rapidly, he says. The survey findings were inconclusive on whether the decline in the inverted supplier deliveries index was due to easing logistical constraints or lower demand. Meanwhile, the employment index continued to decline, remaining in contractionary territory for 14 consecutive months. The index tracking expected business conditions in six months' time increased sharply to its highest level since the end of 2024. Van der Linde says the survey findings suggest that sentiment improved after global tariffs were suspended and businesses were hopeful that local political disagreements on policy within the government would be resolved. ALSO READ: PMI down slightly with concerns about global trade uncertainty How manufacturing slipped further in May This chart shows how manufacturing PMI slipped further in May, pressured by soft local and international demand: Source: BER ALSO READ: This is where we would be if SA sustained an economic growth rate of 4.5% PMI at lowest level since April 2020 Van der Linde says the headline PMI has fallen to its lowest level since April 2020, when it was 30.9, emphasising just how weak demand is for South African manufactured goods. 'The employment index has remained in contractionary territory for the past 14 months, as manufacturers continue to scale down production due to stagnant demand.' He says the manufacturing sector is expected to weigh on first-quarter real GDP growth, and that looks likely to be the case in the second quarter as well. 'First-quarter economic data releases have been weak, pointing to 0% growth in the first quarter of 2025 compared to the fourth quarter of 2024. A quarterly contraction cannot be ruled out. Our below-consensus real GDP growth forecast for 2025 remains at 1.0%.' This table shows the subcomponents of the Manufacturing PMI fared over the past three months: Source: BER
The Citizen
14-05-2025
- Business
- The Citizen
Economic activity slows in April as economy struggles
Although the South African economy is muddling along, there is some hope thanks to low inflation, low fuel prices and a strong rand. Economic activity has slowed in April as the economy struggles with downside risks, such as the United States' (US) punitive import tariffs, plummeting markets and sharply lower forecasts for global economic growth. According to the BankservAfrica Economic Transactions Index (BETI), that measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices, economic activity slipped in April. 'The BETI reached its lowest level of the year of 136.4 in April, down by 0.6% on the 137.2 recorded in March,' Shergeran Naidoo, BankservAfrica's head of stakeholder engagements, says. Although the BETI is still 1.5% higher than a year ago, the slowdown reflects the impact of April's announcement of U.S. punitive import tariffs, which marked the beginning of a developing trade war leading to daily volatility, plummeting markets and slashed global growth forecasts. Elize Kruger, an independent economist, says confidence levels across the globe and in South Africa have been knocked by the sheer uncertainty that these developments brought on. 'Low confidence and uncertainty are detrimental to economic activity, as investors and households hold back on spending decisions until there is more clarity.' ALSO READ: Economic activity in SA struggling to gain momentum Good news for local economy despite global setbacks However, despite global setbacks, positive factors are expected to support economic activity in 2025, she says. 'While the overall effect of global developments is negative for the South African economy, prompting a downward revision of 2025 growth forecasts by around 0.5 percentage points, several offsetting factors are offering some relief. 'The global downturn is expected to dampen commodity demand and prices, but lower international oil prices are easing inflation pressures, and rising gold prices may help counter export losses. Many South African export commodities also remain exempt from US tariffs, providing potential support for the mining sector and broader economy.' Kruger points out that other economic indicators were mixed in April, sending conflicting signals about the strength of the economy. The S&P Global South Africa Purchasing Managers' Index rose to 50.0 in April, increasing from 48.3 in March, after four months in negative territory. ALSO READ: SA's economic growth outlook growing increasingly dim Manufacturing is struggling, but car sales are recovering Meanwhile, the seasonally adjusted Absa Purchasing Managers' Index (PMI) remained in contractionary territory for a sixth consecutive month. Data from Statistics SA also recently confirmed that the manufacturing sector has entered a technical recession with two consecutive quarterly contractions. However, encouragingly, Naamsa figures revealed that the strong performance in the vehicle sales market continued in April 2025. 'All indicators point to the likelihood that, after several false starts, full-year vehicle sales in 2025 will finally return to pre-Covid levels, reflecting an improvement in household budgets due to lower inflation and interest rates,' Kruger says. ALSO READ: Increased unemployment rate red flag for weak economic growth Pockets of excellence in local economy will help economic activity 'With some pockets of excellence in the South African economy, such as in the renewable energy, automotive and financial sectors and positive developments relating to the de-escalation of the global trade war in recent days, such as the trade deals between the US and UK and China, the South African economy can regain momentum in the second half of the year.' Kruger says the launch of the second phase of Operation Vulindlela is also a positive development, confirming government's commitment to push forward on much-needed structural reforms. After reaching an all-time high in March, the number of transactions cleared through BankservAfrica in April 2025 subsided to 167.9 million compared to 172.4 million in March, but it was still 7% up on a year ago. The standardised nominal value of transactions eased off to R1.320 trillion in April compared to R1.365 trillion in March 2025, with the average value per transaction tracked in the BETI continuing on its downward trend to R7 482. ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert Structural tailwinds will push up economic activity Kruger says some structural tailwinds should continue to push economic activity higher on the local front in 2025 despite global developments. With inflation currently at 2.7%, below the South African Reserve Bank (Sarb) 3-6% target band, there is significant room to cut interest rates from the current repo rate level of 7.5% by at least 50 basis points. 'Real interest rates are simply unnecessarily punitive for an economy muddling along, unable to gain meaningful momentum,' she says. At 4.3%, the average real repo rate remains highly restrictive, especially when compared to the neutral level of 2.7%. Meanwhile, the rand has regained nearly all its post-US Liberation Day losses, helped by some weakness in the US dollar and is trading at fairly strong levels, Kruger says. 'The low inflation rate will also play a key role in supporting the recovery of salary earners' purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real salary increases, which should boost consumer spending.'
