The seasonally adjusted Absa Purchasing Managers’ Index (PMI) increased by 0.9 points to 49.6 in October, from a revised 48.7 in September, marking a second consecutive monthly improvement, with all five components of the headline index increasing.

However, while activity and new sales orders have recovered some ground from their August lows, employment remains particularly weak.

Simultaneously, purchasing-price pressures intensified and expectations regarding future business conditions deteriorated.

The business activity index edged higher to 48.6 points in October, following a more substantial improvement in September. Similarly, the new sales orders index increased for a second consecutive month to 46.8 points.

While encouraging, both indices remain below the neutral 50-point mark, indicating that production and demand conditions remain under pressure, Absa notes.

The improvement in new orders was accompanied by a rise in the export sales index, which approached the neutral mark. Absa says this suggests some easing in the pressure on external demand, although the index does not yet signal an outright increase in export orders.

Notable was the further increase in the purchasing prices index, from 71.1 to 73.7 points. The sharp rise in fuel prices at the beginning of October likely contributed to the increase, alongside a somewhat weaker rand.

However, manufacturers should receive some relief in November following the temporary fuel-levy reductions announced in the Medium-Term Budget Policy Statement.

After improving from a low in July, the index tracking expected business conditions in six months’ time fell to 51.7 points in October, from 55.3 in September. While still marginally above the neutral mark, the decline suggests that purchasing managers remain cautious about the outlook. Respondents highlighted uncertainty surrounding the upcoming local government elections, Absa states.