By Prinesha Naidoo
(Bloomberg) – South African factory output shrank for a third straight month in August.
Key insights
- The drop in output exacerbates a poor start to the third quarter for an economy that managed to dodge a second recession in consecutive years after it expanded an annualised 3.1% in the three months through June.
- A gauge measuring sentiment in South Africa’s manufacturing industry fell to the lowest level in more than a decade in September. It will probably get worse after the measure tracking expected business conditions in six months’ time declined for a fourth month, according to Absa’s Purchasing Managers’ Index.
- Manufacturing accounts for about 14% of gross domestic product and output is very sensitive to power-supply constraints. While Eskom hasn’t implemented large-scale blackouts since the first quarter, a member of the utility’s board, Nelisiwe Magubane, has warned that an uptick in economic growth could lead to a new round of power cuts as Eskom won’t be able to respond to an increase in demand for electricity.
- The largest declines were in the iron and steel, non-ferrous metal products and machinery sectors.
- South Africa’s economy is stuck in its longest downward cycle since 1945, with business confidence at the lowest level in more than three decades.
