SA factory sentiment falls; extends worst start in decade

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A gauge measuring sentiment in South Africa’s manufacturing industry declined in May, extending its worst start to a year since the financial crisis.

Absa Group’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, fell to 45.4 from 47.2 in April, the Johannesburg-based lender said in an emailed statement Monday. The reading missed the 48 median estimate of six economists in a Bloomberg survey.

Key Insights

Weakness in factory output, which contributes about 14% to gross domestic product, adds further pressure to South Africa’s attempt to recover from last year’s recession and, with a slump in mining, suggests another poor quarter after an expected contraction in the first three months. The index has been below the neutral 50 mark every month this year, making this its worst start since 2009.

The statistics agency releases GDP data Tuesday, with the median estimate in a Bloomberg survey of 14 economists showing an expected 1.6% contraction in the first quarter from the previous three months.

The sub-indexes for purchasing prices, business activity, inventories and new-sales orders declined.

The index tracking expected business conditions in six months’ time remained unchanged at 62.3, Absa said.

"This is more than 4 points above the average recorded during 2018, which means that respondents remain fairly optimistic that conditions will improve going forward."

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