South Africa Factory Sentiment Jumps to Record High On Demand

An index measuring South African manufacturing sentiment rose to the highest level yet in October as the demand continued to recover from coronavirus lockdown measures.

Absa Group Ltd.’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, increased to 60.9 from a revised 58.5 in September, the Johannesburg-based lender said Monday in an emailed statement. That’s the first time the index has topped 60 and is the highest since record-keeping began September 1999.

Key Insights

  • The increase in PMI was supported by the business-activity and new-sales orders sub-indexes, which remained high. While this signals a strong start to the fourth quarter, some businesses reported demand and capacity nearing normal, pre-Covid 19 levels, Absa said. That means future monthly gains could be limited as the rebound in output starts to flatten.
  • The subindex tracking expected business conditions in six months’ time fell to 56.7 from 64.5 because renewed restrictions in Europe sparked fears that demand for South African exports will decline and lead to concerns over a possible second wave of local infections and a return to a stricter lockdown.
  • At 49.1, the employment index rose for a fifth consecutive month. The near-50 level suggests that employment levels are stabilizing after significant job losses in the second and third quarters, Absa said. After a lockdown that shut most of the economy in the three months through June, the country is in the longest recession in 28 years and erased nine years of job gains, according to statistics agency data.
  • NOTE: The latest PMI release includes updated seasonal adjustment factors and changes to the weightings of the five subcomponents, Absa said.

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