PMI rises above 50 but recovery may not last as costs mount

The escalating conflict involving the United States, Israel and Iran is adding to pressure on South African businesses and consumers, who were already struggling with rising costs. New data shows that business activity improved in April — but the increase may be short-lived and could be helping the sector avoid slipping back into contraction rather than signalling a sustained recovery. Absa’s latest purchasing managers’ index (PMI) rose to 52,6 in April from 49,0 in March.

The PMI is a survey-based measure of business conditions in the manufacturing and private sectors. A reading above 50 indicates expansion, while below 50 signals contraction. The move above 50 is the first since September last year.

The improvement was driven by stronger business activity and a sharp rise in new sales orders. However, the report cautions that this may not reflect a lasting increase in demand. This divergence suggests that the recovery is not broad-based and remains vulnerable to external headwinds.

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While activity has increased for a second consecutive month, the gains were largely driven by domestic demand, with export sales declining. “Moreover, some respondents said orders may have been brought forward in anticipation of further cost increases, potentially resulting in weaker demand in the months ahead. While this supported the headline PMI in April, it may also point to temporary factors rather than a sustained increase in underlying demand,” the report said.

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