Manufacturing activity drops in March, but it's not all bad news

The Absa Purchasing Managers’ Index (PMI) slipped back to below 50 points in March.

It decreased to 49.2 index points, from 51.7 in February.

The Index is an indication of manufacturer sentiment in the country and is seen as a measure of confidence in terms of investing into the future.

While the PMI has been choppy in recent months, the average for the first quarter of this year is equal to the final quarter of 2023, Absa says.

"In the fourth quarter, the gross value added by the sector managed to eke out a 0.2% quarter-on-quarter expansion, with a more robust annual increase. The PMI generally suggests a similar experience is possible in the first quarter."

Absa

Bruce Whitfield interviews Absa economist Sello Sekele, and asks about the impact of lowered interest rate cut expectations on the Index.

"Interest rates boost cyclical demand. When they come down demand tends to rise, and when they increase it tends to dampen."

Sello Sekele, Economist - Absa Group

The main factor that determines the level of economic activity in any sector though, is the pace of structural reforms, she adds.

It's not all bad news, though - the PMI did show a further improvement in sentiment towards business conditions in the future.

"The index tracking expected business conditions in six months’ time rose to 62.1 points."

Absa

This is the most upbeat that respondents have been about business conditions going forward since the start of 2023, Absa said.