Absa Purchasing Managers Index Contracts To 436 In August

Absa PMI Contracts to 43.6 in August, Signaling South Africa's Manufacturing Sector Slowdown

Key Points

1. The Absa Purchasing Managers' Index (PMI) fell to 43.6 in August, indicating a contraction in the manufacturing sector.
2. This marks the first time the PMI has fallen below 50 since June 2020, signaling a slowdown in manufacturing activity.
3. The contraction is primarily driven by a decline in new orders and production levels, as well as increased input costs.

Analysis

The PMI is a closely watched indicator of the health of the manufacturing sector, which accounts for around 15% of South Africa's GDP. A reading below 50 indicates contraction, while a reading above 50 indicates expansion.

The August PMI reading of 43.6 is the lowest since June 2020, when the economy was reeling from the impact of the COVID-19 pandemic. It also marks the first time the PMI has fallen below 50 since then.

The contraction in the manufacturing sector is primarily driven by a decline in new orders and production levels. This suggests that demand for manufactured goods is weakening, both domestically and internationally.

In addition, manufacturers are also facing increased input costs, such as raw materials and energy. This is putting pressure on profit margins and making it more difficult for manufacturers to expand production.

Conclusion

The contraction in the manufacturing sector is a concern for the South African economy, as it could lead to job losses and slower economic growth. The government and the central bank will need to monitor the situation closely and take steps to support the manufacturing sector if necessary.