Business Maverick: Absa Purchasing Managers’ Index drops sharply as economic headwinds gather

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Business Maverick: Absa Purchasing Managers’ Index drops sharply as economic headwinds gather By Ed Stoddard EdStoddardZA

South Africa’s seasonally adjusted Absa Purchasing Managers’ Index declined in August to 45.7 from 52.1 in July, a sharp decline into the red as any reading below 50 is seen as being in negative territory. Each of the five major components that comprise the index were below the neutral 50-point mark.Respondents continued to be fairly downbeat about exports for a third straight month, while domestic demand likely also weighed on orders,” Absa said.

The decline was significant, but it came after an unexpected bounce from 46.2 points in June to 52.1 points in July. This was the first time since December 2018 that it had been above the neutral 50 point mark. Given the generally poor confidence levels in the economy, it was perhaps unrealistic to expect it to remain in positive territory. And there were also mounting concerns in August about the US/China trade war and the global economy.

What is perhaps most worrying about the data is that it is a snapshot of sentiment in the third quarter. On Tuesday 3 September, StatsSA will release its gross domestic product reading for the second quarter, which will tell us whether or not we have avoided a recession after the big 3.2% contraction in Q1.

The expectations are that a recession has been dodged, but that growth and confidence levels remain weak. This latest PMI reading suggests that confidence levels well into Q3 remained low, which is not a good sign overall for 2019.

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