Absa PMI falls to 13-month low in August

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South Africa’s seasonally adjusted Absa Purchasing Managers’ Index (PMI) fell to a 13-month low in August driven by large declines in new sales, business activity and also possibly by talk over land reforms, a survey showed on Monday.

The index, which is compiled by the Bureau for Economic Research and gauges manufacturing activity in Africa’s most industrialised economy, fell to 43.4 in August from 51.5 in July, its lowest reading since July 2017 and well below the 50-mark separating contraction from expansion.

The deterioration was driven by sharp declines in the new sales orders index as well as the business activity index, Absa said in the release, a reflection of renewed weakness in domestic demand as businesses seemed to favour exports.

The South African government’s plans to expropriate land without compensation to redress racial disparities in ownership also unnerved markets because of concerns about wider threats to property rights, likely also affected the survey.

“The significant declines in August are surprising as it is hard to imagine that the underlying economic conditions deteriorated as rapidly as reflected by the main PMI subcomponents,” the bank said.

“The responses of purchasing managers may have been influenced by the further ratcheting up of the land debate during the past month,” said Absa.

President Cyril Ramaphosa said in late July the ruling African National Congress (ANC) was forging ahead with plans to change the constitution to allow the expropriation of land without compensation.

A tweet from U.S. President Donald Trump asking his government to study alleged “land and farm seizures” and the “killing of farmers” also exacerbated the debate.

The rand also took a hammering in August as local policy uncertainty compounded a massive emerging market selloff triggered by financial crises in Argentina and Turkey.