Sentiment in output remains subdued, to degrees similar to those seen at the height of the Covid-19 pandemic and lower than those seen during the global financial crisis.
Absa’s most recent production survey for the current quarter showed that pressure loss is the main driving force behind weak sentiment in the sector.
Historical knowledge shows that accepting as true has only been to those degrees a few times.
“The confidence point in the current quarter was unchanged at 17 since the last quarter, below the low of 20 reached by the global currency crisis,” Absa said.
“Interruptions in the electric power source not only have a direct effect on generation and capacity and hurt profitability due to prices related to load loss mitigation measures (such as diesel generators), but also have a negative effect on sentiment,” said Justin Schmidt, head of production at Absa Bank Relationship.
“With confidence degrees remaining at the same very low degrees seen in the first quarter, the effects of pressure loss are visible across all production subsectors. “
Absa’s quarterly survey, in collaboration with the Bureau for Economic Research (BER), takes into account the sentiment of 700 marketers in the productive sector.
Confidence index levels range from 0 to one hundred, where 0 reflects a lack of overconfidence and one hundred reflects excessive confidence when all participants are satisfied with existing trading conditions.
The bank said a challenging economic environment continues to restrict household disposable income, forcing brands to face only relief in sales volumes, but also a slowdown in promoting price inflation in local and foreign markets.
“Compared to the first quarter, domestic sales and domestic promotion value according to production unit fell 22 and 19 according to percentage, respectively, while export sales decreased to 15 percent and export promotion value according to production unit fell 14 consistent with percentage problems. Further evidence of the effect of pressure loss can be seen at lower production levels and the highest point of capacity underutilization.
“As the intensity of pressure drop remains high, the load loss charge in the form of production shutdowns and purchases of diesel for turbines puts pressure on margins,” Schmidt said.
Manufacturers in general are pessimistic about the long-term expectations of the business environment. Absa said a record majority of brands expect business situations to worsen further over the next 12 months.
“In the short term, the industry situation is very likely to worsen, as cargo loss is expected to increase the winter season. However, the positive side is that as production capacity increases, the business situation will improve in the long term. “Schmidt said.
“Manufacturing remains important to the expansion of the South African economy. . . Given the current energy crisis facing the country, manufacturers’ investments are aimed at maintaining business while investments in additions or extensions remain pending,” Schmidt added.
The following chart illustrates the fluctuation of business confidence in the business environment:
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