South Africa Factory Mood Drop Signals Recovery Is Losing Steam

An index measuring South African manufacturing sentiment fell to a four-month low in November, signaling a recovery in the sector is losing momentum as conditions normalize after the gradual easing of coronavirus restrictions.

Absa Group Ltd.’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, fell to 52.6 from a record-high 60.9 in the October, the Johannesburg-based lender said Tuesday in an emailed statement. That’s the lowest level since July when the nationwide lockdown was at so-called alert level 3 and a ban on liquor sales was reinstated to reduce alcohol-related hospital admissions. The median of four economists’ estimates in a Bloomberg survey was 60.

South Africa Factory Mood Drop Signals Recovery Is Losing Steam

While the reading remains above 50, which signals expansion, the decline comes after three consecutive upward moves and was expected “as output levels for many sub-sectors are nearing pre-pandemic levels and will need sustained demand growth to fuel a further output expansion,” Absa said.

The sub-index measuring new-sales orders fell below 50 for the first time in six months partly due to a decline in export sales that may be linked to stricter lockdown measures in Europe. The index tracking expected business conditions in six months’ time dipped to 52.7, suggesting that concerns about a second wave of local infections is also weighing on sentiment.

“While positive news regarding vaccine developments may result in an improved global growth outlook over the medium term, the next six months remain highly uncertain,” Absa said.

The manufacturing sector accounts for about 11% of gross domestic product and the index has flitted between expansion and contraction for most of the past decade as power shortages and low business confidence weighed on investment.

©2020 Bloomberg L.P.

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