The Purchasing Managers’ Index has increased for a third month to reach 53.1 index points in December, but South Africa's business activity index deteriorated further, which is most concerning. The seasonally adjusted PMI increased slightly from 52.6 in November and while the headline number is positive, the underlying picture is more mixed, especially regarding the business activity index which indicates weak underlying momentum in the sector.
The business activity index ended 2022 on a weak level and failed to rise above the neutral 50-point mark through the year after the first three months, with intense load shedding contributing to the weakness in output. According to BER, a further positive development was an increase in the expected business conditions index that indicates that purchasing managers became more optimistic about business conditions in six months, with the index rising to 54.9 in December from 51.7 in November, probably underpinned by the expectation that the peak in cost pressure is for now behind manufacturers.
BER is also worried about the renewed increase in the supplier deliveries index, saying with new sales orders dipping somewhat, this could point to renewed friction in supply chains rather than strong demand causing a lengthening in delivery times. “Indeed, given that activity remained poor, it is unlikely that actual employment will improve to this extent on a sustained basis.”