Business conditions in SA manufacturing sector improves, as lockdown eases – data

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A worker assembles a dashboard on production line.
A worker assembles a dashboard on production line.
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Business conditions in the manufacturing sector improved during September, this with lockdown restrictions being eased further to Level 1, data shows.

The September Absa Purchasing Managers Index (PMI) - which measures activity in the manufacturing sector – was released on Thursday. It lifted to 58.3 index points, up from 57.3 points reported in August. A figure above 50 reflects an improvement while a figure below 50 reflects decreased activity.

"The shift to a lower lockdown level mid-month likely drove the further improvement in business conditions in the local manufacturing sector," the report read.

The PMI may be back at pre-lockdown levels, but this does not directly translate into official manufacturing activity being back to pre-pandemic levels. "The high level merely means that conditions continue to improve," it emphasised.

"Purchasing managers remain optimistic about business conditions going forward," the report read. The sub-index which tracks expectations for business conditions in six months' time improved to 64.5 from 63.4 reported in August, this is much higher than the low of 27.3 reported in April.

"The employment index remains the main drag on the PMI," the report read. The sub-index however improved to 44.5 in September compared to 39 points reported in August, indicating that the pace of retrenchments slowed. According to Statistics South Africa's Quarterly Labour Force Survey released this week, about 185 000 formal jobs were lost in the sector, the report indicated

Demand and production improved, but at a slower rate than that recorded in August, noted Investec economist Kamilla Kaplan.

Kaplan said that the third quarter PMI averaged at 55.6 points compared to 50.1 in the second quarter, suggesting a production rebound following the sharp 32.4% year-on-year drop during the prior quarter.

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