A gauge measuring South African manufacturer sentiment increased more than expected in August as nationwide power cuts eased, fuel prices dropped and facilities owned by Toyota Motor Corp. that were damaged by floods this year reopened.
(Bloomberg) — A gauge measuring South African manufacturer sentiment increased more than expected in August as nationwide power cuts eased, fuel prices dropped and facilities owned by Toyota Motor Corp. that were damaged by floods this year reopened.
Absa Group Ltd.’s purchasing managers’ index, compiled by the Bureau for Economic Research, jumped to 52.1 from 47.6 in July, the Johannesburg-based lender said Thursday in an emailed statement. That was well above the median of four economists’ estimates in a Bloomberg survey of 48.2.
The barometer moved above 50, indicating an expansion in activity as the manufacturing sector, which accounts for 13% of gross domestic product, recovers after a weak start to the third quarter.
Rolling blackouts were implemented by state-owned power utility Eskom Holdings SOC Ltd. on seven days last month, down from 22 days in July, which likely aided production. That was evident in the business activity sub-index, which is back above the neutral 50-point mark for the first time since March, Absa said.
The return of production at Toyota’s flood-affected factory in the eastern coastal province of KwaZulu-Natal also drove the index higher, supporting demand across the value chain, the lender said. In addition, gasoline prices fell 4.9% in August from a record high in the previous month.
“The steep fall in the fuel price at the start of August likely helped with alleviating overall cost pressures, with a further notable decline in the fuel price expected next week,” Absa said. “While headline producer price inflation for final manufactured goods remains very high, the PMI suggests that cost pressure at the start of the pipeline has moderated.”
More Upbeat
The improvement in the overall index was also driven by a gauge tracking expected business conditions in six months’ time that rose to 57.9 in August from 49.4 a month prior. The increase suggests purchasing managers are more upbeat about short-term prospects.
The purchasing price subindex dropped for a second month to the lowest level since mid-2021, even as input prices remain very high, suggesting cost pressure at the start of the pipeline have moderated, Absa said.
Still the weakening of global demand may weigh on the outlook in the coming months. The latest global PMI data suggests that external demand is easing, the lender said.
The International Monetary Fund cut its global growth outlook for this year to 3.2% in July, from a 3.6% forecast in April, and warned that the world economy may soon be on the cusp of an outright recession. That’s as central banks have unleashed the most aggressive tightening of monetary policy in years to cool surging inflation.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
