(3 Minutes Read)
Staff correspondent
The Purchasing Managers’ Index (PMI) of South Africa compiled by the Bureau for Economic Research (BER) and sponsored by Absa Bank rose to 53.1 points in December of 2022 from 52.6 points in November, giving cheers to the South African economy. Though the headline number is positive, the business activity index, a component of the PMI, is still in the negative zone
The Purchasing Managers’ Index (PMI) of South Africa compiled by the Bureau for Economic Research (BER) and sponsored by Absa Bank rose to 53.1 points in December of 2022 from 52.6 points in November, giving cheers to the South African economy. Though the headline number is positive, the business activity index, a component of the PMI, is still in the negative zone. The latest reading presents the second successive month of expansion in South Africa’s manufacturing activity since May.
The headline PMI is calculated as the weighted average of the business activity, new orders, employment, supplier deliveries, and inventories, assigning equal weightage in the calculation. A value of 50 in the index indicates no change in the activity (neutral), a value above 50 indicates increased activity (positive) and a value below 50 indicates decreased activity (negative). The PMI value is expressed in absolute terms
The new sales orders remained firmly above the 50-point mark for a second month, showing sustained demand growth. The supplier deliveries index improved to 65.8 from 61.7. The employment index shot up by 8.6 points in December to 54.3.
The purchasing price index declined to its lowest level (64.4) since late 2019. It suggests the cost pressures have peaked. The lower Brent crude oil price and slightly stronger rand exchange rate are responsible for this phenomenon. Since the lower levels came at the end of the year, economists are expecting a further moderation in producer price inflation in the first quarter of 2023. Another encouraging factor is the positive development in the expected business confidence index, which did rise to 54.9 in December from 51.7 in November.
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However, the business activity index plunged to a weak note of 45.2. The index was struggling to rise above the 50-point level throughout the year. Sustained and intense load-shedding is the likely reason argued by the report. Also, the inventories index registered a sharp decline to 46.3 from 51.9. The negative trends in these two indices, though worrying factors, were made good by meaty growth in other variables, taking headline PMI to the positive zone.
