March PMI improves, but quarterly performance weakest since 2009

| 0 Comments

PMI_down_100.jpgDuring Quarter 1 of 2020, the seasonally-adjusted Absa Purchasing Managers' Index (PMI) experienced its weakest quarterly performance since 2009. The PMI averaged at 45.9 index points, compared with 47.6 in Quarter 4 of 2019.

The weak quarterly outcome was despite the PMI improving to 48.1 index points in March 2020, from 44.3 index points in February. Nonetheless, the PMI still remained in contractionary terrain for the 14th consecutive month.

The PMI was, to some extent, lifted by the Supplier Deliveries sub-index moving higher in March, reflecting slower delivery times. Under normal circumstances, a slowdown in supplier deliveries is seen as positive for the sector, as it suggests that suppliers are busier. However, in this case, the slowdown in delivery times is caused by global supply chain disruptions.

This phenomenon is observed in PMIs worldwide, but amplified in the South African manufacturing PMI, as this component carries a bigger weighting (the sub-index brings much-needed stability to the headline PMI and results in a better correlation with official manufacturing output figures in normal times).

Without the inadvertent boost from supplier deliveries, the headline PMI would have turned out lower in March. With this in mind, it is better to look at the PMI sub-components to understand the current underlying conditions in the factory sector.

Indeed, the Business Activity and New Sales Orders Indices hovered around 11-year-low levels in March. The nationwide lockdown imposed towards the end of March meant that most factories lost three working days compared to a 'normal' March.

Supply chain disruptions mean that production is also not expected to return to full capacity immediately after the lockdown is lifted. Combined with the extended lockdown, April factory figures will likely show a deep contraction. The extension is likely to result in some factories having to close permanently. This will have a sustained negative impact on production and could also result in further job losses in the sector. This will push the Employment Index, that is already close to a 6-year low, into further job losses.

It is no surprise then that respondents turned very pessimistic about expected business conditions going forward. The index tracking expected business conditions in 6 months' time fell to 29.1 index points in March. This is below the lowest reading recorded during the 2008/2009 recession and is, in fact, the lowest level on record (since 1999). This means that respondents anticipate that the worst is yet to come for the manufacturing sector.

The Inventories Index remained very low and ticked up by a marginal 0.2 index points in March.

The Purchasing Price Index ticked up and rose to a 6-month high in March. The main driver was likely the significant weakening of the Rand exchange rate during the month. A weaker Rand results in an increase in the Rand-cost of imports of intermediate goods and raw materials. The significant decline in the Brent Crude oil price meant that the diesel price fell sharply at the beginning of April, which will have alleviated some pressure on costs during April.

Leave a comment


 

 

Career opportunites

Category Implementation Manager

  • >500 000 Gauteng Permanent Projects / Category Management Supply Chain
As an Executive Search and Career Consultant specializing

Head of Procurement

  • >500 000 Gauteng Permanent Procurement Management Strategic Sourcing
As an Executive Search and Career Consultant specializing

Regional Souring Manager

  • >500 000 Gauteng Permanent Procurement Management Strategic Sourcing
As an Executive Search and Career Consultant specializing

Procurement Director

  • >500 000 KwaZulu Natal Permanent Procurement Management Strategic Sourcing
As an Executive Search and Career Consultant specializing

Procurement Specialist

  • >500 000 Buyer Gauteng Permanent Procurement Officer / Specialist
As an Executive Search and Career Consultant specializing

Senior Sourcing Manager

  • >500 000 Gauteng Permanent Procurement Management Strategic Sourcing Supply Chain
As an Executive Search and Career Consultant specializing

Indirect Sourcing Programme Manager

  • >500 000 Contract Projects / Category Management Strategic Sourcing Western Cape
As an Executive Search and Career Consultant specializing

Deputy Chief Commercial Officer

  • >500 000 Contract Gauteng Procurement Management Supplier / Business Development
As an Executive Search and Career Consultant specializing

GROUP PROCUREMENT MANAGER

  • Gauteng Permanent Procurement Management Supplier / Business Development
Operating out of Johannesburg, this is a key

Tutor and Coordinator

  • Gauteng Operations, Planning & Inventory Permanent Procurement Management Supplier / Business Development
Purpose of the job: To plan, coach, advise

Commodity Manager

  • <500 000 Commodities Gauteng Procurement Management
Are you a Commodity Manager looking for the

Supply Chain Professional

  • <500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Supply Planning

  • <500 000 Gauteng Operations, Planning & Inventory Supply Chain
Seeking dynamic candidates to take to the market

Industrial Engineer

  • <500 000 Gauteng Industrial Engineer Procurement Consultant
Are you an Industrial Engineer looking to make

Logistics Manager

  • >500 000 Gauteng Logistics & Warehousing Supply Chain
Seeking vibrant industry specific individuals seeking new opportunities

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Procurement Management
Looking for an Operations Manager to take into

Supply Chain Systems Administrator

  • >500 000 Gauteng Procurement Management Strategic Sourcing Supply Chain
One of South Africa's leading, mining companies is

Logistics Manager

  • <500 000 Gauteng Logistics & Warehousing Procurement Management
Are you an experienced Logistics Manager looking for

Continuous Improvement Manager

  • >500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Warehouse Assistant

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory
I am currently looking for ambitious Demand Planner,