Absa PMI erased the losses sustained in March and edged back above the neutral 50-point mark in April

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) erased the losses sustained in March and edged back above the neutral 50-point mark in April. The index rose by 4 points to reach 50.9 index points in April. This is more or less in line with the level recorded in February and above the average recorded during the first three months of the year.

The improvement in the headline PMI was driven by increases in four of the five key subcomponents, with only the supplier deliveries index dipping lower compared to March. However, with the exception of the new sales orders index which is firmly in positive terrain, the other four subcomponents remained below the neutral 50-point mark. The business activity index rose from 46 to 49.1 in April, while the employment index managed to edge up to 49.5.

If demand holds up in coming months, activity should follow the new sales orders index into positive terrain. Indeed, the PMI’s leading indicator is above one, with orders outstripping inventory levels, which usually bodes well for output going forward. However, the index tracking expected business conditions in six months’ time declined for a second month to reach 69.6 index points in April. This is almost 10 points below an almost 17-year high reached February, but still well above the average level recorded during the past 12 months.

The purchasing price index rose by 6.2 points to reach 66.9 in April after a slight uptick in March. The rise is likely driven by the weaker rand exchange rate as well as a higher Brent crude oil price compared to the previous month (on average). These factors also resulted in the hefty fuel price hike effective from today, after fuel prices also increased sharply at the start of April, mainly on the back of levy increases.