South African Factory Mood Drops on Steel Strike, Power Cuts

(Bloomberg) --

An index measuring South African manufacturing sentiment fell for a second straight month in October as a three-week long strike in the steel and engineering sector and the resumption of rolling blackouts weighed on factory activity.  

Absa Group Ltd.’s purchasing managers’ index, compiled by the Bureau for Economic Research, fell to 53.6 in October from a revised 54.7 in September, the Johannesburg-based lender said Tuesday in an emailed statement. The latest release includes updated seasonal-adjustment factors, it said.

The new sales orders index fell to 48 from 53, suggesting that demand for manufactured goods “suffered a meaningful knock” during the month, the lender said. “Respondents reported slightly improved export sales in October, emphasizing that it was domestic constraints that weighed on the demand for manufactured goods.”

While the index tracking input costs dropped to 84.4 from 85.5, its level still points to a fast acceleration in prices, Absa said. This is likely to be heightened by a record-high fuel-price increase from Wednesday and significantly higher freight-shipping costs, it said.

Still, the decline in the headline index was balanced by a drop in daily coronavirus infections and an easing of lockdown restrictions to so-called alert level 1 that bolstered mobility and are likely to have “supported consumer spending and may have shielded the manufacturing sector somewhat,” Absa said. That helped the index remain above 50 for a third consecutive month, signaling expansion in an industry that accounts for 13% of gross domestic product. 

Purchasing managers remain upbeat even as a gauge tracking expected business conditions in six months’ time dipped to 62.1 from 62.3.

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