The Absa PMI maintained its 2022 climb, rising for the third consecutive month in March to 60 from 58.6 in February. That means it remains in positive territory but its range is 0 to 100, so a mark of 60 hardly means that the purchasing managers surveyed in the manufacturing sector are brimming with confidence.
“The sustained improvement in the headline PMI bodes well for the continued recovery of the manufacturing sector after it was dealt a blow in the third quarter of last year. Indeed, the PMI suggests that the sector should record a robust quarterly expansion in the first quarter of this year,” Absa said in a statement.
Underpinning the March performance was the new sales order index, which rose to 61.7 in March from 56.9 in February. That is essentially an indication that the manufacturing sector is buying more stuff.
“A recovery in the local tourism sector could be driving domestic demand for selected manufactured goods. Going forward, the recent surge in some of SA’s export commodity prices could buttress demand from local mining companies as they ramp up production or plan investment outlays,” Absa said.
But not all of the PMI’s shoots have a green hue.
“… a striking outcome of the March PMI survey was on the price front. Like many of its international counterparts, the purchasing price index of the Absa PMI surged in March. At 95.9, the series reached the highest level since the BER started publishing the series in 1999,” Absa said.
“The surge in the oil price is a key driver of the increase, but prices of food, fertiliser and other raw material inputs are also rising rapidly. As flagged last month, the risk is that these prices remain high(er) for longer as the war in Ukraine drags on and sanctions on Russia are possibly intensified.”
Another cause for concern is the employment index, which slipped back into negative territory – 50 is the neutral mark – falling to 48.5 in March from 50.7 in February. The unemployment rate hit a record high of 35.3% in the fourth quarter of last year and the latest PMI reading underscores the depressing point that South Africa’s economic recovery has been a “jobless” one to date.
On another front, the Automotive Business Council, also known as Naamsa, reported that South African new vehicle sales in March hit 50,607 units, the highest monthly sales total since October 2019, before the onset of the pandemic. That was also a 16.5% rise on the sales figures for March 2021.
‘The positive new vehicle market performance during March 2022, reaching a level last achieved pre-Covid-19, could be attributed to pent up demand aligned with the increasing normalisation of business conditions as well as enticing new model choices in the domestic market,” Naamsa said.
But surging fuel prices and rising interest rates are headwinds to the continued growth of domestic sales. And vehicle exports declined.
“Export sales … recorded a decline of 4,861 units, or 12.4%, to 34,285 units in March 2022 compared to the 39,146 vehicles exported in March 2021,” Naamsa said. “Vehicle exports declined during the month but prospects for 2022 remain optimistic on the back of further new locally manufactured model introductions during the year.”
But Absa added this caveat.
“Global growth is expected to moderate as the Russia-Ukraine conflict increasingly impacts on demand and supply chains, in particular in Europe, the domestic industry’s top export region.”
So just as the gears shift higher, the gradient gets steeper. South Africa’s economic recovery remains an uphill climb. DM/BM