SA factory mood drops as optimism for 2022 wanes

Against backdrop of increased uncertainty due to emergence of latest coronavirus variant.
The Eurozone, a key export market, was also hit by a surge in Covid-19 infections. Image: Waldo Swiegers/Bloomberg

An index measuring South African manufacturing sentiment fell more than expected in December and showed that purchasing managers are less optimistic about business conditions in the new year.

Absa’s purchasing managers’ index, compiled by the Bureau for Economic Research, fell to 54.1 in December from 57.2 a month earlier. The median of three economists’ estimates in a Bloomberg survey was 55.5.

The decline was registered against the backdrop of increased uncertainty due to the emergence of the omicron coronavirus variant, with more than 90 countries imposing travel bans on South Africa after its discovery.

The Eurozone, a key export market, was also hit by a surge in Covid-19 infections and some lockdown restrictions were tightened in a number of countries during the period.

All the major subcomponents of the index excluding inventories dropped in December.

The new sales orders index fell to 51.7, from 54, with the sub-index measuring exports declining by more than 10 points.

Still, the headline index averaged 55 in the fourth quarter, signalling expansion in an industry that accounts for 13% of gross domestic product.

Purchasing managers were less optimistic about the coming months. The gauge tracking expected business conditions in six months’ fell to 53.1, from 56.8 – the third straight monthly decline.

© 2022 Bloomberg L.P.

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