South Africa factory mood leaps as political uncertainty clears
South African manufacturers’ sentiment improved more than expected in July as political uncertainty cleared after the formation of a centrist coalition government following the country’s May 29 elections, helping boost demand and business activity.
The overall Purchasing Managers’ Index increased to 52.4 from 45.7 in June, exiting contraction territory for the first time since April, Absa said Thursday. The median estimate of three economists was for the index to rise to 48.
The data reflects a “solid start to the third quarter following a weak May and June,” the lender said. Orders are “possibly starting to come through as the ‘wait and see’ approach is ending now that there is more certainty on the local political front,” the lender said.
The African National Congress lost its outright majority for the first time in 30 years in the elections. Some feared it would forge an alliance with leftist parties to form a government, but those concerns were dispelled when it entered into a so-called government of national unity with several business-friendly rivals.
The business activity index jumped 14.5 points to 50.8 in July, supported by new sales orders, which rose 17.5 points to 55.4.
“The improvements suggest that on-hold orders are now being realised and translated into better activity,” Absa said. “Furthermore, export sales increased significantly in July following four consecutive months of declines.”
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