SA factory mood deteriorates on weaker demand, output

A GAUGE measuring manufacturing sentiment in South Africa fell to the lowest level in more than two years because of weaker demand and constrained production

Absa’s purchasing managers’ index, compiled by the Bureau for Economic Research, fell to 45.5 in September from 49.7 in the previous month, the Johannesburg-based lender said Monday in an emailed statement. The latest PMI reading missed the median forecast of three economists in a Bloomberg survey of 49.5, falling further below 50 points — a level that indicates contraction in an industry that contributes about 14% to South Africa’s gross domestic product.

The September reading was the lowest since July 2021, according to data compiled by Bloomberg. Both external and domestic demand for South African manufactured goods came under pressure in the month, the Johannesburg-based bank said.

“This most likely reflects the weakening growth momentum in the Eurozone and the UK, both key export markets for local manufacturers,” Absa said. “On the domestic front, restrictive borrowing costs and perhaps also the sharp fuel price hikes at the start of September weighed on demand.”

Factory output also took a knock because of increased and more intense power outages in September. That resulted in the business activity index slumping 8.1 points to 41.9.

“For the entire third quarter, the business activity index averaged 43.3, down from an average of 48.1 in the second quarter,” Absa said. “The move lower would be consistent with a quarterly contraction in actual manufacturing output. If this materialises, it will weigh on overall GDP growth momentum in the third quarter.”  – Bloomberg