Business activity slumps further in November

Business activity slumped further in November, the Absa Purchasing Manager Index shows.

The PMI, which measures economic activity, is based on a survey of different purchasing managers at SA businesses. It is conducted by the Bureau for Economic Research and sponsored by Absa.

The index for November ticked down to 47.7 points, from 48.1 points in October. Any figure above the neutral 50-index points reflects an improvement in economic activity, while figures below 50 reflect a deterioration. Four out of the five measures of economic activity in the survey declined.

Despite the index decline, the average level of the PMI for October and November is still higher than that recorded for the third quarter of the year, the report read.

The PMI also includes several sub-categories. The index that tracks business activity slumped further in November to a multi-year low of 39.4 points, compared to 45.6 points in October.

"According to Stats SA, quarterly manufacturing production contracted in the third quarter of 2019. The weak readings on the business activity index seen in the fourth quarter so far argue against a strong, if any, recovery in manufacturing output," the report read.

Demand also remained under pressure. While the new sales orders index improved slightly in September and October, it declined from 44.5 points recorded in October to 43.3 index points in November. 

"The current level remained well below the neutral 50-point mark. This suggests that orders remained depressed. Respondents saw a downturn in export demand in November," the report read.

The only major measure which recorded an improvement from the previous month was the purchasing inventories index. It picked up from a 10-year low of 39.2 points in October, to 44.1 points. However, the index still remained below the 50-point mark.

The only measure to come in above 50 was the suppliers delivery index. This index declined from 56.5 points to 55.3 points for November.

Less pessimism

The business conditions index improved to 47.4 points, following five previous consecutive declines. "On a more positive note, respondents turned slightly less pessimistic about the near-term future," the report read. "Nonetheless, despite the uptick, the latest reading means that conditions are still expected to worsen in six months' time, albeit less so than before."

The purchasing price index, meanwhile, fell by 5.7 points, following a 7.7 point decline recorded in October. "The sharp declines point to a significant moderation in cost increases. Indeed, the index fell to the lowest level since early 2018," the report read.

The employment index also "nudged down" 0.5 points to 41.8, after having improved in the past two months.