South African Factory Mood Improves to Best Level in 23 Years

(Bloomberg) -- An index measuring South African manufacturing sentiment rose to the highest level in almost 23 years in March though its advance may soon be halted, with survey respondents less optimistic about business conditions toward the end of the year.

Absa Group Ltd.'s purchasing managers' index, compiled by the Bureau for Economic Research, climbed to 60, from 58.6 month earlier. That's the highest monthly reading since record keeping began in September 1999. The median of six economists' estimates in a Bloomberg survey was 58.3.

The index measures month-on-month changes and not aggregate levels of activity, which may not necessarily be as strong as it was previously. Still, the continued improvement bodes well for the sector's recovery and suggests it should record a “robust” expansion in the first quarter of this year, the Johannesburg-based lender said in a statement.

The main index has now been above 50, the level that signals expansion, for eight consecutive months, suggesting conditions in an industry hard-hit by stop-start coronavirus-lockdown restrictions, global supply-chain disruptions and the worst civil unrest in South Africa since the end of White-minority rule in 1994 are continuing to normalize. Concerns about stagflation and the impact of Russia's invasion of Ukraine pose a risk to the outlook however, Absa said.

The gauge tracking expected business conditions in six months' time fell to 55.1, from 69.5, the biggest single-month decline since November 2008 when the global financial crisis started. “The level of the expectations index remains well above recent lows seen during the height of the pandemic,” Absa said.

Surges in the price of oil, food, fertilizer and other raw materials drove the purchasing price index up by 6 points to 95.9, the highest level since September 1999. Survey respondents flagged sustained high prices stemming from the war in Ukraine along with domestic fuel price increases, supply chain disruptions and heightened shortages of key inputs amid coronavirus lockdowns in China as key concerns.