1 September 2021

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rebounded in August 2021 following a record single-month decline in July. The August PMI performed better than last month’s steep decline and rose to 57.9 points from a very low 43.5 points in July. In comparison, the PMI stood at 57.4 in June.

A normalisation of demand and output for businesses affected by July’s looting and further boost from less strict lockdown restrictions meant that a recovery was always on the cards given that the survey tracks month-on-month movements in business conditions. The extent of the rebound is nonetheless encouraging, especially on the orders and activity front. That being said, even if September’s headline PMI print remains at the elevated level seen in August, the third quarter as a whole will be lower than the second quarter due to the severity of the shock experienced in July. 

Both the business activity and new sales order indices erased July’s losses and returned to levels slightly above those seen in June. Business activity came in at 58.5 points and new sales orders at 60.9 – both about 30 points better than July’s print. In addition to a recovery from the looting shock, subsectors with strong links to the hospitality and liquor industries likely saw a rise in domestic demand following the less strict lockdown restrictions, while respondents also noted an encouraging rise in export sales.

The inventories index also recovered the previous month’s losses to reach 54, from 39.1 in July. Again, it is important to keep in mind that these movements reflect month-on-month changes from an extremely weak July. The impact on the official production statistics will also be more pronounced in the monthly rate rather than the annual print. Although less so than earlier in the year, the annual figure may still benefit from a lower base set in 2020.

Bucking the general upward trend of the major PMI subindices was the employment index which edged down further, relative to the previous month (albeit this index had not declined to the same extent as the others in July). Respondents also turned somewhat less optimistic about business conditions going forward. The index tracking expected business conditions in six months’ time fell to 59.7, from 64.3 in July. Renewed concerns about the strength of the global economic recovery amid the spread of the Delta COVID-19 variant may have contributed to this decline. In addition, cost pressures for manufacturers remain elevated. The purchasing price index ticked up again after four consecutive declines. The higher fuel price at the start of August likely contributed to the renewed rise in costs, while a weaker rand exchange rate (on average) also added to costs of imported raw materials and intermediate goods.