The seasonally adjusted Absa Purchasing Managers’ Index (PMI) dropped back below the neutral 50-point mark in March after encouraging improvements during the first two months of the year. The index shed 3.9 points to reach a level of 46.9 in March from 50.8 in February.

The key drivers of the fall in the headline PMI were sharp declines in the business activity and new sales orders indices, while inventories continued to decline. The business activity index fell by 8.1 points to 46.0, while new sales orders declined by a similar margin to reach 44.5 in March. Respondents indicated that exports declined during the month, which could explain the deterioration in overall sales orders. Exports could be affected by the stronger rand exchange rate of late, which can weigh on competitiveness of local goods in international markets. The dip in demand, in turn, filtered through to lower activity levels. The inventories index fell further below the neutral 50-point mark to 41.4 – the lowest level since April 2017.

After three months of sharp improvements, the index tracking expected business conditions in six months’ time declined from its best level since 2001. The index fell from 79.1 to 73.7 in March, which is still high from a historic perspective.

The purchasing price index edged slightly higher in March after three straight declines. The uptick was likely driven by the slightly higher Brent crude oil price during the month, while the rand was also marginally weaker against the US dollar.