24 June 2021
The Q2 Absa Manufacturing Survey has seen a significant improvement in overall sector confidence, with business confidence rising by 21 points to 46 points during the quarter, the highest level since 2012.
“The increase was largely driven by strong selling price hikes and output increases,” said Justin Schmidt, head of manufacturing sector at Absa Retail and Business Bank. “Better than expected demand resulted in higher capacity utilisation and early indications suggest that this may continue – manufacturers are positive about the export outlook over the next 12 months.”
The quarterly survey, which covers approximately 700 businesspeople in the manufacturing sector, was conducted by the Bureau for Economic Research (BER) at Stellenbosch University between 12 May and 31 May 2021. The index ranges between zero and 100, with zero reflecting an extreme lack of confidence and 100 extreme confidence.
The survey findings echo recent data releases, which showed positive signs of growth and continued recovery. South Africa’s real GDP grew by a seasonally adjusted 4,6% quarter-on-quarter in Q1 2021, with manufacturing continuing its recovery with a 1,6% increase quarter-on-quarter. Looking ahead to the second quarter, the Absa PMI rose to 57,8 points in May 2021 from the April 2021 figure of 56,2 points.
Source: Bureau for Economic Research (BER) at Stellenbosch University
But while there is evidence of green shoots, the sector is not out of the woods yet. For the third quarter in a row, the majority of manufacturers indicated low levels of raw material stocks relative to their planned production. “This is having a knock-on effect on input prices for manufacturers,” noted Schmidt.
The majority of manufacturers have also noted that finished good stocks have been low relative to expected demand, with this sub-index reaching its lowest level on record. “This is not only a further indication of the shortage of raw materials available but, positively, also an indication that demand continues to exceed expectations.”
Manufacturers’ expectations regarding the next 12 months are more optimistic with the majority of manufacturers expecting trade and business conditions to improve. “Forward looking expectations need to come to fruition before we will see sustained investment into new capacity in the sector. However, load shedding as well as the impact of the third wave of Covid-19 pose a risk to the recovery,” said Schmidt.
For more information, please contact:
Inge Lamprecht on 082 885 4128 / inge.lamprecht@absa.africa, Asha Speckman on 067 419 7085 / asha.speckman@absa.africa, Gillian du Toit on 071 688 3087 / gillian.dutoit@absa.africa, or Zain Khan on 076 961 7041 / zain.khan@absa.africa
About Absa Bank Limited
Absa Bank Limited (‘Absa Bank’) is a wholly-owned subsidiary of Absa Group Limited, which is listed on the Johannesburg Stock Exchange and is one of Africa’s largest financial services groups. Absa offers a range of retail, business, corporate and investment banking and wealth management and insurance products and services primarily in South Africa and Namibia.
For further information about Absa, please visit our website www.absa.co.za
Published on Thursday, 8th July 2021 - 10:24
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