Absa’s Purchasing Managers Index improved to 52.4 pts in July from 45.7 pts in June. July’s print exceeded the consensus estimate of 48 pts. The PMI is a crucial leading indicator of domestic manufacturing activity and offers insight into industry constraints. There are early indications that the GNU has been well received by manufacturers, which will have a positive impact on the industry as a whole. This was also evident in vehicle sales data for July, with a welcome 1.5% y/y increase in total vehicle sales recorded. July’s vehicle sales figures could mark a turning point for an improved second half of the year. Naamsa remains optimistic about improved industry prospects under the GNU. Improved consumer and business confidence, expected SARB monetary easing, and, most importantly, the effect of slower price increases due to a stronger ZAR, point to scope for further recovery in the industry through the months ahead.
Today, all eyes will be on the US employment report for July, which will provide fresh insights into the state of the US labour market and the scope for prospective inflation and rate cuts. Any indications of a weakening labour market would support the case for the Federal Reserve to consider lowering interest rates in the months ahead. While the headline payroll data might imply that there is no immediate need for the Fed to reduce rates, the household survey is expected to reveal that many of the newly created jobs are part-time positions. Historically, an increase in part-time employment alongside a decrease in full-time jobs has been a reliable precursor to economic recessions.