The SMEI rebounded to 50.4 in July, marking an improvement from the previous month. This recovery was mainly attributed to better expectations and improved credit conditions. However, the performance sub-index remained in contractionary territory for the second consecutive month, indicating some challenges in certain sectors.
One of the positive factors contributing to the rebound was the acceleration in manufacturing activity. Manufacturing SMEs reported an increase in production activity and new orders, leading to a rise in the manufacturing performance sub-index to 51.3. This was a significant improvement compared to the previous month.
Despite the overall improvement in the SMEI, certain sectors continued to face challenges. Real estate, construction, finance, retail, and catering industries experienced declines, which had a negative impact on the performance sub-index. In particular, the services sector saw a slight improvement but still remained below the 50 mark at 49.3.
The growth momentum tracker also reflected some concerning trends. The finished product inventory sub-index rebounded more than new orders, indicating a potential slowdown in demand. Additionally, labour-intensive industrial activity declined, raising questions about the sustainability of the rebound in the SMEI.
External demand also played a role in influencing the SMEI rebound. The new export orders index fell below 50, signaling a weakening in demand from overseas markets. This could have a ripple effect on manufacturing SMEs and their ability to sustain their current levels of production activity.
While the rebound in the SMEI in July is a positive sign, there are still challenges that need to be addressed. The performance sub-index remains a concern, especially in sectors such as real estate, construction, and retail. Monitoring factors such as external demand and growth momentum will be crucial in determining the sustainability of the rebound in the coming months.