South Africa PMI Drops to 3-Year Low, Indicating Factory Slump

South Africa’s purchasing managers’ index fell to a three-year low in September as mining strikes spread and demand from Europe waned, Kagiso Tiso Holdings said.

The seasonally adjusted index declined to 46.2 from 51 in August, Johannesburg-based Kagiso said in an e-mailed statement today. An index level below 50 indicates a contraction in factory output. The median estimate of four economists surveyed by Bloomberg was for the index to decline to 49.7.

Manufacturing, which makes up 15 percent of the economy, contracted 1 percent in the second quarter, restricting growth in Africa’s largest economy to an annualized 3.2 percent. A strike that shut down Lonmin Plc.’s Marikana mine in August spread to gold and platinum mines and the transportation industry last month.

“The pullback does not bode well for actual factory sector output in the third quarter,” Andre Coetzee, managing director of the Chartered Institute of Purchasing and Supply, which conducts the survey on behalf of Kagiso, said in the statement.

Finance Minister Pravin Gordhan is set to lower his economic growth forecasts when he gives his mid-term budget on Oct. 24. In February, he predicted growth of 2.7 percent this year, compared with 3.1 percent expansion in 2011.

The Reserve Bank on Sept. 20 held its benchmark repurchase rate at 5 percent, the lowest level in at least 30 years, as the European debt crisis saps demand for manufactured exports. The deficit on the current account, the broadest measure of trade in goods and services, widened to 6.4 percent of gross domestic product in the second quarter, the highest in almost four years, as exports slumped.

The index measuring business activity dropped 7.6 points to 43, the lowest level since July 2011, Kagiso said. The new sales orders index declined 0.7 points to 46.2, while the employment sub-index fell to 46.5 from 51 in August, it said. The price sub-index rose 4.9 points to 75.8.

The Bureau for Economic Research, based at the University of Stellenbosch near Cape Town, conducts the PMI survey along with the institute on behalf of Kagiso.

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