Absa figures indicate slow economic growth

What little economic recovery SA may have been achieving in during the Covid-19 pandemic might already be faltering, if figures from Absa’s recent Purchasing Managers’ Index (PMI) are anything to go by.

According to the report, the PMI declined to 50.3 index points in December 2020, down from 52.6 in November and its lowest level since July last year

One of the reasons for the drop is a drop in production in the manufacturing sector.

“Indeed, despite a strong start in October, the average reading for the fourth quarter [of 2020]is basically unchanged from the third quarter,” Absa said in a recent statement.

The business activity index declined to 44.9 index points in December, which Absa said is an indication of lower manufacturing output.

The new sales order index also fell from 49 points in November to 45.2 in December, likely due to a drop in export orders during the fourth quarter.

It’s predicted that renewed lockdown restrictions have impacted domestic demand in a similar way.

Another drag on the latest PMI was the purchasing price index, although at 70.4 points it still remains well above the 50-point neutral line.

Employment was the worst hit, with the index ending at 43.8 points by December.

“The renewed downtick in the employment index, after reaching a high in October, suggests that the employment recovery will likely continue to be very subdued,” Absa said.

Only two of the six measured indices increased in the fourth quarter of 2020.

The first was the inventories index, which rose to 53.6 points from its November level of 51.8, and the supplier index, which rose to 64 points.

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