SA factory sentiment jumps to 3 year high - but may not last

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The jump to a three-year high in a gauge measuring sentiment in South Africa’s manufacturing industry may not be sustainable.

Absa's Purchasing Managers’ Index, compiled by the Bureau for Economic Research, increased to 52.1 from 46.2 in June, the Johannesburg-based lender said in an emailed statement Thursday. That’s the first time since December that the index is above 50, which indicates expansion. The median estimate of 4 economists in a Bloomberg survey was 46.5.

Key Insights

The sub index for new-sales orders rose above 50 for the first time since December and the one for purchasing inventories the first time since January, boosting the overall PMI. These levels may not be sustained as it was likely driven by increased output by manufacturers to safeguard against potential strike-related disruptions in the automotive or platinum-mining industries, where wage negotiations are taking place, Absa said.

While four of the five major sub-components registered were above 50, the lender said it’s unclear whether the improvement can be sustained because of concerns about the health of manufacturing globally. The index measuring expected business conditions in six months’ time declined to 54.5, the lowest level of the year, yet still positive.

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