Imports still face delays in reaching SA amid continuing battle against congestion
02 July 2024 - 05:00
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The Absa purchasing managers’ index (PMI) shows that imports are still being delayed as SA continues to battle port congestion.
Due to supply and delivery issues, the index measuring supply performance barely improved in June, rising to 56.1 from May’s 55.4. Absa said port issues were likely to remain a concern in coming months.
While the PMI rose 1.9 points to 45.7 points in June from 43.8 in May it remained below the 50-point mark for the second month running.
The PMI report states: “Supplier deliveries are worsening, with the index increasing relative to May (this is indicative of slower delivery times). Port issues are likely to have remained an issue. For example, at the Durban Container Terminal, only seven of the 16 ship-to-shore cranes were operating, and about 55 straddle carriers were available compared with the planned 67.”
A World Bank report last month ranked Durban and Cape Town among the world’s poorest-performing ports.
“The improvement is welcomed, but it was the second consecutive month that the PMI remained below the 50-point mark,” said Absa. “After a very strong start to the second quarter, which was also reflected in solid growth in official manufacturing production data, May and June have been poor.”
The index for expected business conditions in six months jumped from 57.6 in May to 68.1 in June.
“This is essentially the only measure in the survey that tracks sentiment, and the significant increase bodes well. Indeed, respondents have not been this optimistic about business conditions since early 2022,” says the PMI report.
“The prevailing political uncertainty [at the time of the survey in the last week of June] should have diminished over this period, and there could be hope that domestic and global demand could look better amid expected monetary policy easing.”
Standard Bank and Nedbank have said that they expect two interest cuts before year’s end. The average business activity index in the second quarter exceeded that of the first quarter only slightly.
Picture: KAREN MOOLMAN
The average business activity index in the second quarter exceeded that of the first quarter only slightly.
Despite stable electricity supply throughout the second quarter, insufficient demand affected the sector’s performance.
In June, the business activity index declined further to 36.3 points, down from 38.1 points in May. This downturn comes after the strong start to the second quarter.
“Furthermore, new sales orders remain muted, edging up to 37.9 points in June from 37.8 points in May. Many comments from respondents flag depressed demand conditions.
“Export sales have been stuck below the neutral 50-point mark for four consecutive months, which suggests that the weakness is not just coming from domestic demand,” said the report.
Africa economist at London-based Capital Economics David Omojomolo said that the breakdown of the data showed that PMI’s improvements were muted, and while new sales orders and employment edged up it remained well in contractionary territory.
“More positive news came from the purchasing price index. It declined for the third consecutive month, which should provide some cheer for the [Reserve Bank’s] overall inflation fight. Expected business conditions improved sharply too, perhaps a sign that businesses feel reduced political uncertainty after the conclusion of the recent elections will provide a boost to growth,” said Omojomolo. With the recent activity indicators, it suggests that SA ended the second quarter in a vulnerable but better place compared with that in recent months.
“We still think that growth will pick up over the coming months. Better electricity conditions will be a key factor, alongside a more stable business environment associated with the ANC-DA-led government of national unity,” said Omojomolo.
However, the economic recovery will face obstacles due to stringent policies.
The Reserve Bank seems reluctant to ease monetary conditions quickly, and in the near future the GNU plans to prioritise renewed efforts towards fiscal consolidation.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Port bottlenecks are still dragging the PMI down
Imports still face delays in reaching SA amid continuing battle against congestion
The Absa purchasing managers’ index (PMI) shows that imports are still being delayed as SA continues to battle port congestion.
Due to supply and delivery issues, the index measuring supply performance barely improved in June, rising to 56.1 from May’s 55.4. Absa said port issues were likely to remain a concern in coming months.
While the PMI rose 1.9 points to 45.7 points in June from 43.8 in May it remained below the 50-point mark for the second month running.
The PMI report states: “Supplier deliveries are worsening, with the index increasing relative to May (this is indicative of slower delivery times). Port issues are likely to have remained an issue. For example, at the Durban Container Terminal, only seven of the 16 ship-to-shore cranes were operating, and about 55 straddle carriers were available compared with the planned 67.”
A World Bank report last month ranked Durban and Cape Town among the world’s poorest-performing ports.
“The improvement is welcomed, but it was the second consecutive month that the PMI remained below the 50-point mark,” said Absa. “After a very strong start to the second quarter, which was also reflected in solid growth in official manufacturing production data, May and June have been poor.”
The index for expected business conditions in six months jumped from 57.6 in May to 68.1 in June.
“This is essentially the only measure in the survey that tracks sentiment, and the significant increase bodes well. Indeed, respondents have not been this optimistic about business conditions since early 2022,” says the PMI report.
“The prevailing political uncertainty [at the time of the survey in the last week of June] should have diminished over this period, and there could be hope that domestic and global demand could look better amid expected monetary policy easing.”
Standard Bank and Nedbank have said that they expect two interest cuts before year’s end. The average business activity index in the second quarter exceeded that of the first quarter only slightly.
The average business activity index in the second quarter exceeded that of the first quarter only slightly.
Despite stable electricity supply throughout the second quarter, insufficient demand affected the sector’s performance.
In June, the business activity index declined further to 36.3 points, down from 38.1 points in May. This downturn comes after the strong start to the second quarter.
“Furthermore, new sales orders remain muted, edging up to 37.9 points in June from 37.8 points in May. Many comments from respondents flag depressed demand conditions.
“Export sales have been stuck below the neutral 50-point mark for four consecutive months, which suggests that the weakness is not just coming from domestic demand,” said the report.
Africa economist at London-based Capital Economics David Omojomolo said that the breakdown of the data showed that PMI’s improvements were muted, and while new sales orders and employment edged up it remained well in contractionary territory.
“More positive news came from the purchasing price index. It declined for the third consecutive month, which should provide some cheer for the [Reserve Bank’s] overall inflation fight. Expected business conditions improved sharply too, perhaps a sign that businesses feel reduced political uncertainty after the conclusion of the recent elections will provide a boost to growth,” said Omojomolo. With the recent activity indicators, it suggests that SA ended the second quarter in a vulnerable but better place compared with that in recent months.
“We still think that growth will pick up over the coming months. Better electricity conditions will be a key factor, alongside a more stable business environment associated with the ANC-DA-led government of national unity,” said Omojomolo.
However, the economic recovery will face obstacles due to stringent policies.
The Reserve Bank seems reluctant to ease monetary conditions quickly, and in the near future the GNU plans to prioritise renewed efforts towards fiscal consolidation.
majavun@businesslive.co.za
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