South African PMI Shows First Factory Growth in Three Months

JOHANNESBURG (Capital Markets in Africa) – An index tracking South African manufacturing activity rose for the first month in three in July, but this was tempered by a lowering of expectations for future business conditions.

The purchasing managers’ index compiled by the Stellenbosch-based Bureau for Economic Research and Absa Bank Ltd. climbed to 51.5 in July from 47.9 in June. A reading above 50 indicates growth in the factory sector. This is the highest reading since May 2017.

Business sentiment and the rand have wiped out all the gains that came on the back of President Cyril Ramaphosa’s ascent to the power since December. Manufacturing, which accounts for about 13 percent of gross domestic product, shrank in the first quarter, contributing to the economy’s biggest contraction in nine years. The industry lost 105,000 jobs in the three months through June.

“The recovery was driven by an improvement in demand,” Absa said in an emailed statement Wednesday. “While current conditions seem to have improved, purchasing managers turned very pessimistic about expected conditions going forward.”

The index tracking expected business conditions in six months’ time declined to 48.7 in July, the first deterioration in this gauge since August, Absa said. Part of this is because current conditions are, according to the survey, better than they have been in recent months, so an improvement from this more elevated level may be less likely than from tougher conditions before, it said.

Source: Bloomberg Business News