Survey reveals business sentiment in manufacturing slips

BUSINESS sentiment in South Africa’s manufacturing sector slipped sharply last month, according to a key survey released yesterday.

The seasonally-adjusted Absa Purchasing Managers’ Index (PMI) slumped after a solid performance during the first quarter of 2017. The index fell to 44.7 index points from an average of 51.9 during the first quarter. The PMI is an indicator of the economic health of the manufacturing sector. It provides information about current business conditions to company decision-makers, analysts and purchasing managers. The index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

Absa said the decline was relatively broad based, with key sub-components measuring business activity and inventories slumping to multi-year lows.

The survey suggested that the manufacturing sector experienced a rough start to the second quarter of 2017.

The new sales orders index declined sharply in April, pulling along business activity. Absa said the 8.3-point fall in orders was probably driven by the expectation of weaker demand from local customers, because respondents still noted an improvement in export orders.

This was the first full survey since the recent cabinet reshuffle and subsequent sovereign credit rating downgrades.

Absa said it was likely that respondents now expect economic growth and domestic demand to be weaker. As such, they have probably scaled back expectations for orders and activity growth.