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SA’s manufacturing activity bounces back — Absa PMI

July’s record single-month decline was the lowest PMI reading since May 2020.
Image: Luke Sharrett/Bloomberg

South Africa’s manufacturing activity saw a substantial recovery in August after the dust settled for businesses affected by looting in some parts of the country and the lifting of some lockdown restrictions in July, the Absa Purchasing Manager’s Index (PMI) showed on Wednesday.

The seasonally-adjusted survey, a gauge of factory sentiments in Africa’s most industrialised economy, grew to 57.9 points in August after recording a steep decline in July of 43.5 points. The latest reading rises above the 50-point mark that separates expansion from contraction.

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July’s record single-month decline was the lowest PMI reading since May 2020.

“A normalisation of demand and output for businesses affected by July’s looting and a further boost from less strict lockdown restrictions meant that a recovery was always on the cards given that the survey tracks month-on-month movements in business conditions,” Absa said in a statement.

Five of the six PMI subcomponents registered a reading above the 50-point mark, except for the employment index which dipped to 47.1 points. According to the survey, the employment indices latest readings highlight the risk to more factory job losses in the third quarter.

According to the survey, the business activity and new sales order indices staged a strong recovery and erased the losses seen in July, with both registering readings above 29 points since July. The business activity and new sales order indices registered 58.5 points and 60.9 points respectively, returning to levels last seen in June.

The survey further flagged an uptick in the purchasing price index to 84.2 points, after seeing four consecutive month-to-month declines. The increase is likely driven by the fuel price hikes at the start of August and a weaker rand exchange rate which added to the cost of imported raw materials and intermediate goods.

Absa says that although recovery from the shock of July’s unrest and looting in South Africa’s KwaZulu-Natal and Gauteng provinces has begun, quarter-on-quarter normalisation might be harder to achieve.

“Even if September’s headline PMI print remains at the elevated level seen in August, the third quarter as a whole will be lower than the second quarter due to the severity of the shock experienced in July.”

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