South African factory sentiment rises for second month but recovery stays fragile

South Africa’s manufacturing sentiment improved for a second month in October, but weak domestic demand and logistics bottlenecks kept the gain marginal. The seasonally adjusted Absa PMI rose to 49.6 points in October from a revised 48.7 in the previous month. The 50-point mark separates expansion from contraction.

The survey, reported on Monday, Nov 2, showed all five sub-components recorded gains last month. Absa, the South African bank that sponsors the index, still called the recovery fragile.

Activity and orders stay below neutral

The business activity index edged higher to 48.6 points in October. The new sales orders index increased to 46.8 points.

“Both indices remain below the neutral 50-point mark, indicating that production and demand conditions remain under pressure,” Absa said in a statement.

Expectations weaken ahead of elections

The index tracking expected business conditions in six months’ time fell to 51.7 in October from 55.3 in September. Absa linked the decline to logistics constraints and political uncertainty ahead of municipal elections on November 4.

“A sustained recovery in demand and production, supported by easing cost pressures, will be important in determining whether the sector can move decisively back into expansion territory,” Absa said.