South African Manufacturer Mood Dips on New Lockdown Rules

(Bloomberg) -- An index measuring South African manufacturing sentiment dipped less-than-expected in June as the country reimposed strict lockdown measures to curb the spread of coronavirus infections.

Absa Group Ltd.'s purchasing managers' index, compiled by the Bureau for Economic Research, fell to 57.4 from 57.8 in May, the Johannesburg-based lender said Thursday in an emailed statement. The median of four economists' estimates in a Bloomberg survey was 56.5.

President Cyril Ramaphosa moved the country to level 3 restrictions in mid-June, only to increase the alert level by one step almost a fortnight later as the authorities grapple with a third wave of coronavirus cases. Measures now include an extended curfew, a ban on the sale of alcohol and limits on travel to and from Gauteng, the nation's commercial capital that has been hardest-hit by the surge in infections.

While an annual increase in manufacturing output is “effectively guaranteed” for the three months through June, after sentiment plunged at the height of lockdown restrictions a year earlier, sustained new measures could stall the broader economy's growth momentum into the third quarter, the lender said. The sector accounts for 13% of gross domestic product.

Purchasing managers also turned less optimistic about the future, with the index tracking expected business conditions in six months' time falling to 59.3 from 63.5. It still signals an anticipated improvement in business conditions, though less than before, Absa said.

“The move to level 4 is likely to have soured expectations further, specifically for those businesses with close ties to the hospitality industry,” it said. “On the positive side, the outlook for manufacturers targeting the European and U.S. export markets remains very bright, with recent international PMI readings remaining at or near record-high levels.”