The Purchasing Managers’ Index (PMI) edged lower in December 2019 to 47.1 index points, down from 47.7 points recorded in November 2019. The December figure is about 1 point below the average recorded throughout 2019.
The PMI paints a bleak picture of the manufacturing sector’s performance in 2019 as the headline PMI managed to edge above 50 points for only two months in the year. Bouts of load shedding, persistent weak domestic demand and more intense headwinds from the global economy likely weighed on activity during the year.
In December, two of the major sub-components registered fairly large declines.
The New Sales Orders Index slumped to record its lowest level seen in 2019. Part of this may stem from weaker external demand as respondents noted a drop in exports for a second consecutive month.
The Business Activity Index fell further in December after a sharp drop was recorded in November. The index declined to its lowest level since April 2017. Some of the respondents highlighted load shedding as a cause for the drop in production during the final month of the year. The risk of further load shedding dampens expectations for a strong recovery in output at the start of 2020.
These declines were, to some extent, countered by smaller improvements in the three other sub-components: Employment, Inventories and Supplier Deliveries. However, of these three, only Supplier Deliveries came in above 50 points, with the others still pointing to a worsening of conditions.
The Employment Index increased slightly to reach 43 index points in December. While this is somewhat higher than the level seen in recent months, the reading remains well below the neutral 50-point mark and points to continued job losses in the sector.
The Inventories Index rose for a second consecutive month to reach its best level since July 2019. Of concern is that Inventories are well above New Sales Orders which means that the PMI’s so-called ‘leading indicator’ points to further weakness in activity at the start of 2020.
The Supplier Deliveries Index recovered some of last month’s loss and rose back to 56 points in December. The index has managed to remain above the neutral 50-point mark for four consecutive months.
The index tracking expected business conditions in six months’ time declined again in December after a slight improvement in November. The index fell to 45.9 from 47.4 in November, which is in stark contrast to the start of 2019 when the index was at a lofty 67.2 points. The return of load shedding likely soured expectations in December, while some may be concerned that export demand could continue to falter in the first half of 2020.
The Purchasing Price Index rose in December to reach 65.8 index points, from 63.3 in November. Despite the increase, the index remains fairly low after sharp declines in October and November.
The Purchasing Price Index edged up somewhat after two straight declines. Despite the slight increase, the index remains fairly low compared with its history and is still about 5 points below the average level recorded during 2019.