Manufacturing sector activity continued to decline in December. Picture: AI lab
The Absa Purchasing Managers’ Index (PMI) declined by 1.9 points to 46.2 points in December 2024, remaining in contractionary territory and reflective of a second consecutive month of declining activity in the manufacturing sector.
This puts the 2024 fourth quarter average at 49 points, not much different from 49.8 for the third quarter, but above 47.8 and 48.1 in the first and second quarters respectively. The PMI is an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) of Stellenbosch University, and sponsored by Absa.
“Worryingly, some respondents noted that conditions in December 2024 were worse than usually seen in December. In addition, export sales dropped sharply and fell back to levels last seen in the first half of 2024,” Nkosiphindile Shange, economist at the BER said in a statement.
In line with the ABSA PMI’s findings, S&P’s Global South Africa Purchasing Managers’ Index (PMI) released earlier this week dropped below the 50 neutral threshold to 49.9 in December, down from 50.9 in November, signalling a small decline in conditions, as sales growth was crimped and hiring was cut back.
“The manufacturing sector experienced a volatile 2024, with this second consecutive monthly decline in December reversing the upward momentum seen in September and October,” said Shange.
The business activity index decreased by 8.7 points to 40.3, with the pull-back in production off the back of a sharp fall in demand.
The new sales orders index reversed gains in September and October and fell to 37.4 points from 45.9 in November. The contraction was from domestic and export sales.
The supplier deliveries index rose to 56 points, increasing by 7.7 points and moving above 50 points for the first time in three months.
With production and orders being significantly weaker, higher demand for supplies was unlikely to be the cause of supplier delays.
“Logistical issues remain, both locally and in global markets, which likely caused the slowdown in delivery times,” the compilers of the index noted.
The employment index fell by 0.4 points to 46.5 and remained in contractionary territory for the ninth consecutive month. Due to volatility and depressed activity, the employment index has been below the 50-point mark for eleven of twelve months.
The purchasing price index fell by 1.3 points to 60.4 in December. “This was surprising given that the rand exchange rate was relatively weaker in December, while fuel prices and LP gas increased at the beginning of the month,” said Shange.
The most positive outcome of the PMI was the index measuring expected business conditions in six months’ time increased by 5.2 points to 67.6 in December, indicating that manufacturers remain optimistic about business conditions in the future.
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