Headlining yesterday’s local data card, the Absa Purchasing Manager’s Index (PMI) rose to 52.8 points from 43.6 points in August. Recall that in August, the index fell sharply into contractionary territory after rising to expansion territory in July, driven by optimism given the formation of the GNU. With a stronger ZAR and declining crude oil prices, fuel price cuts in September added to the improved PMI figure. With the SARB monetary easing cycle underway and further cuts expected with inflation pressures subsiding, there is scope for the seasonally adjusted sentiment indicator to remain in expansionary territory. However, amid ongoing structural issues, years of deindustrialisation and still tough business conditions, further upside to the index will be limited.
Some evidence of improved economic conditions was also seen in the Naamsa vehicle sales data for September. Total vehicle sales contracted -4.1% y/y in September, although this marked a slight improvement from August’s contraction of -4.9% y/y. Despite ongoing economic challenges, there is cautious optimism in the automotive industry. With the recent strengthening of the ZAR and further interest rate cuts anticipated in the coming months, the sector may begin to shift positively, though immediate gains may remain modest.