Manufacturing activity in South Africa surged back to expansionary territory as the country was exempted from crippling power cuts the whole month, in spite of ongoing decline in business activity due to subdued demand.
The S&P Global South Africa Purchasing Managers Index (PMI) moved back above the 50.0 points mark, increasing to 50.3 in April 2024 from 48.4 in March, indicating stabilisation in the country's private sector.
This was in line with the seasonally adjusted Absa PMI which rose to 54 points in April, from 49.2 points in March, signalling a renewed expansion and the strongest activity since March 2022.
At 50.3, however, S&P said the index signalled only a fractional strengthening of business conditions.
S&P said there were signs of stabilisation with regards to both output and new orders at the start of the second quarter.
Although business activity continued to fall amid continued demand weakness, a softer reduction in new orders and drop in load shedding helped some firms to expand output.
Activity decreased in construction and wholesale and retail, but increased in industry and services.
A similar picture was seen for new orders, which declined only marginally and to a much lesser extent than in March.
S&P said respondents indicated that economic conditions remained challenging, while some firms suggested that the upcoming elections had led customers to delay spending.
Meanwhile, new export orders fell modestly, with lower sales reported from a range of African (Botswana, Namibia, Zambia, Zimbabwe) markets but also European economies such as the UK.
S&P Global Market Intelligence economics director, Andrew Harker, said April was a month of stability for South African companies, with output and new orders falling only marginally. “Firms are feeling more optimistic for the future and expanded capacity in April through hiring and the purchasing of additional inputs,” Harker said.
“Some of the headwinds that have held the private sector back recently showed signs of easing in April, with reduced load shedding and a lesser degree of supply-chain delays signalled. Some firms also predict a revitalisation of demand following the upcoming elections.”
Meanwhile, S&P said companies expect business activity to expand over the coming year, partly based on hopes that economic conditions will improve.
Some firms also expect an increase in workloads following the elections.
Employment increased for the third consecutive month, and at the joint-fastest pace since September 2022.
Purchasing activity also rose marginally following a fall in the previous survey period. In turn, inventories increased solidly, and to the largest degree in just over nine years.
Efforts to secure inputs were helped by signs of improvement in supply chains.
S&P said although lead times continued to lengthen as a result of port congestion in Durban, the latest instance of delays was the least pronounced in nine months.
Purchase costs continued to rise sharply in April amid higher prices for energy and fuel, as well as currency weakness.
That said, the pace of inflation eased slightly but staff costs rose at the fastest pace in eight months, driven in large part by an increase in the minimum wage.
BUSINESS REPORT