S. Africa Factory Mood Drops to 5-Month Low on Virus Second Wave

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An index measuring South African manufacturing sentiment fell to a five-month low in December as the country increased restrictions in a bid to limit the fallout from a second wave of coronavirus infections.

Absa Group Ltd.’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, fell to 50.3 from 52.6 in November, according to data released Friday. That’s the lowest level since July, the previous time that the nationwide lockdown was at so-called alert level 3 and liquor sales were banned to reduce alcohol-related hospital admissions.

After declaring a second wave of the Covid-19 pandemic in South Africa, the government extended a curfew and imposed additional restrictions in hotspots, including closing some beaches,from mid-December.

The country moved back to virus alert level 3 from level 1 from midnight on Dec. 28. That included an even longer nationwide curfew, a complete ban on alcohol sales and the closing of beaches in all but two districts.

While the PMI reading remains above 50, which signals expansion, sentiment has now weakened for two consecutive months, signaling that a recovery in the sector may be losing momentum. The index tracking expected business conditions in six months ticked up to 52.9 from 52.7. The second wave of the pandemic, the renewed lockdown restrictions and thereturn of power cuts argues against a strong rebound in early in 2021, Absa said.

The manufacturing sector accounts for about 14% of gross domestic product and the index has flitted between expansion and contraction for most of the past decade as power shortages and low business confidence weighed on investment.

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