The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is encouraged by the improvement in the Absa Purchasing Managers Index (PMI) released recently, with the data showing that businesses are slowly responding to a buoyant consumer, business and investor confidence.
SEIFSA Chief Economist Michael Ade said that, following Cyril Ramaphosa’s election in December as new ANC president, domestic economic data were expected to catch up with growing domestic sentiments resulting from the Nasrec conference. He said that was more so after Ramaphosa assumed the country’s presidency.
However, Ade cautioned that, in addition to positive consumer and business confidence, there was a need for an equal up-tick in demand and supply side dynamics.
SEIFSA is, therefore, encouraged by the improvement in the latest PMI numbers, which had previously dipped below the 50-neutral level, which separates expansion from contraction, in February 2018,” Ade said.
The latest seasonally-adjusted preliminary PMI data show that the composite PMI improved to 50.9 in April 2018, from a lower 46.9 in March 2018. However, the headline PMI data still exhibit a lot of uncertainty and the volatility is driven by volatile input prices, because of factors affecting supply, including the variable exchange rate. Enhanced volatility is also evident in the oscillating performance of the business activity, inventory levels and new sales orders sub-indices of the composite PMI index, which have been largely unpredictable.