Business confidence hit a new three-year low according to the latest Absa Purchasing Managers’ Index (PMI).
The Bureau for Economic Research Absa PMI report, released on Thursday, showed that the seasonally adjusted index edged down to 49.2 in May from 49.8 in April.
“The headline index has now signalled a deterioration in business conditions for four consecutive months. In addition to the downbeat assessment of the current environment, respondents turned notably more negative about business conditions going forward,” BER economists noted in the index report.
The index that tracks expected business conditions in six months’ time dropped to 43.7 in May, from 51 in April, the most pessimistic respondents have been about the near-term outlook since the strictest phase of the Covid-19 lockdown in 2019.
“Eskom confirming earlier concerns about the possibility of higher stages of load-shedding during winter likely contributed to the souring in sentiment,” the economists noted.
The survey’s business activity index shows business conditions in May were virtually unchanged from a subdued April.
“Cumulative load-shedding was roughly similar in April and May and likely did not weigh more/less on activity in May than the previous month,” the report said,
The average index level of business activity in the first two months of the second quarter is below the first-quarter average, suggesting the sector may once again detract from quarterly GDP growth after an expected expansion in the first quarter.
“The new sales orders index was stuck in negative terrain for the fifth straight month, although it improved from April. While export sales had held up well so far in 2023, respondents observed a notable deterioration in May,” the economists added.
Meanwhile, the purchasing price index ticked up once again in May. The weaker rand exchange rate likely added to upward pressure on costs and offset the mitigating impact of the drop in fuel prices at the start of the month.