SA factory mood rises as economy steadies after riots

An index measuring South African factory sentiment jumped by a record in August as conditions normalised after deadly riots, looting and arson disrupted supply chains, industrial output and demand for manufactured goods.

Absa Group’s purchasing managers’ index, compiled by the Bureau for Economic Research, rose to 57.9 from 43.5 in July, the Johannesburg-based lender said Wednesday in an emailed statement. The median of three economists’ estimates in a Bloomberg survey was 48.

The monthly advance was the biggest since record keeping began almost 22 years ago. The index is back above 50, the level that signals expansion in an industry hard-hit by the worst civil unrest in South Africa since the end of White-minority rule in 1994.

While a recovery in the index was “always on the cards” as it tracks month-on-month movements in business conditions, the third-quarter average will be lower than that of the previous three-month period due to the severity of the unrest-induced shock, the lender said. The lifting of some lockdown measures also boosted sentiment, it said.

The index measuring business activity rose to 58.5 from 26.6 and the gauge for new sales orders jumped almost 30 points to 60.9, both erasing unrest-driven losses.

“In addition to a recovery from the looting shock, subsectors with strong links to the hospitality and liquor industries likely saw a rise in domestic demand following the less strict lockdown restrictions, while respondents also noted an encouraging rise in export sales,” Absa said.

The turmoil put at risk about 150 000 jobs, in a country where more than a third of the workforce is jobless, and an index measuring employment dropped to 47.1 from 47.6.

The gauge tracking expected business conditions in six months’ time fell to 59.7 from 64.3 because of concerns about the effect of the Covid-19 delta variant on the global economic recovery and elevated cost pressures for manufacturers, the lender said.