• The November ABSA Purchasing Manager's Index, which measures economic activity in the manufacturing sector, has declined to the lowest level since July.
• The drop indicates that a recovery in SA manufacturing sector is starting to lose momentum.
• While sustained growth in demand is needed to boost production further, renewed lockdowns in Europe appear to be negatively impacting exports.

The recovery in South Africa's manufacturing sector is starting to lose momentum, data shows.

The November ABSA Purchasing Manager's Index (PMI), which measures economic activity in the manufacturing sector, was released on Tuesday.

A figure above the 50 indicates an increase in activity while a figure below 50 indicates decreased activity.

The November PMI fell to 54.6 index points from 60.9 point recorded in October. "The decline comes after three consecutive upward moves and brings the index to the lowest level since July 2020," the report read.

"While still signalling an improvement in business conditions, the drop suggests that the manufacturing sector's recovery is starting to lose momentum."

The decline was expected, with certain subsectors nearing pre-lockdown levels. In order to boost output further, sustained growth in demand is needed.

New sales orders, an indicator of demand, dropped to 49 index points, below the neutral 50-point mark. "This is in part driven by a renewed decline in export sales, which could be linked to a slump in activity in Europe amid stricter lockdowns," the report read.

There is also less optimism domestically about future business conditions, driven by concerns of Covid-19. The indicator for business conditions in six months time dipped to 52.7 points. "While positive news regarding vaccine developments may result in an improved global growth outlook over the medium term, the next six months remain highly uncertain."

The employment indicator, meanwhile, fell to 47.2 points in November, compared to 49.1 points recorded in October. This indicator has not been able to break above the 50-neutral mark since April, when the lockdown was in full force.

Source: News24