South African factory mood remains downbeat for fifth month

South African manufacturing sentiment remained downbeat for a fifth straight month as purchasing-price pressures intensified and expectations about future business conditions deteriorated.

Absa Group’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, rose to 49.6 in October from a revised 48.7 in the prior month, after seasonal adjustment factors used to calculate the PMI and its components were updated as part of an annual review. A reading below 50 indicates that manufacturing activity is contracting.

Energy supply constraints caused by the ongoing wars in Ukraine and Iran have pushed gasoline and diesel prices to record highs. Combined with an almost 4% depreciation in the rand against the dollar since September, they’ve added to the cost of imported inputs.

The pressures contributed to the purchasing-price index rising to 73.7 in October from 71.1 points in the prior month.

The downbeat sentiment reverberated in the index tracking expected business conditions in six months’ time. It fell to 51.7 points last month, from 55.3 in September.

“While still marginally above the neutral mark, the decline suggests that purchasing managers remain cautious about the outlook,” Absa said. “Respondents highlighted uncertainty surrounding the upcoming local government elections, persistent logistics and infrastructure constraints, and pressure on domestic demand.”

The country will hold local-government elections on Wednesday.

Still, manufacturers should get some relief from a temporary fuel-levy reduction announced in the Medium-Term Budget Policy Statement last month.

The fuel levy will be cut by 3 rand ($0.18) per litre for diesel and R1.50 for gasoline from November 4 to December 1. The concession will be extended until January 5 at a lower rate, with the levy reduction trimmed to R1.50 a litre on diesel and 1 rand on gasoline.

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