Financial services firm Absa’s Purchasing Managers’ Index (PMI) declined to 46.8 in July, from 47.3 points in the prior month.
While this reading suggests a weak start to the third quarter, the headline decline arguably overstates the weakness in underlying manufacturing conditions, as domestic demand improved and lifted new sales orders, Absa comments.
This, in turn, supported an improvement in production with the business activity index ticking up for a second consecutive month to 48.8. Improved demand likely supported the uptick in production, albeit insufficient to push it back into positive terrain, it adds.
Although the index remained below the neutral 50- point mark, the steady improvement since May suggests that manufacturing output entered the third quarter on a firmer footing than implied by the headline PMI.
Meanwhile, the new sales orders index recovered almost all of June’s loss, returning to 44.1 index points. The improvement seems to be driven entirely by stronger domestic demand, as export sales plunged in July.
