January 12, 2018 / 9:34 AM / 6 months ago

UPDATE 1-South Africa's Absa PMI falls for first time in four months

(Adds details, analyst quote)

JOHANNESBURG, Jan 12 (Reuters) - South Africa’s seasonally adjusted Absa Purchasing Managers’ Index (PMI) fell for the first time in four months in December with business activity and new sales declining sharply, a survey showed on Friday.

The index, which is compiled by the Bureau for Economic Research and gauges manufacturing activity in Africa’s most industrialised economy, fell to 44.9 in December from 48.6 in November.

“The deterioration was broad-based with all five subcomponents of the headline index falling compared to November’s level. The dismal PMI reading suggests that the South African manufacturing sector ended the year on the backfoot,” analysts at Absa said.

The economy slipped into recession in the first quarter of 2017, due to contractions in the manufacturing, mining and retail sectors, before recovering in the following two quarters as easing drought boosted agricultural production.

Manufacturing, the fourth largest sector at 13 percent of gross domestic product, also recovered in the second half of 2017, although business activity remains below potential.

Political and policy uncertainty have hampered business confidence and investment, but with the ruling African National Congress’s leadership battle concluding in victory for Cyril Ramaphosa, viewed as pro-business, confidence is seen returning.

The index tracking expected business conditions in six months’ time rose to 61.9 in December from 50 in November.

“This suggests that, in the absence of any adverse shocks, the sector could perform better in 2018,” the Absa analysts said. (Reporting by Mfuneko Toyana; Editing by Joe Brock and Robin Pomeroy)

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