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South Africa PMI Remains Below Key Level, Signaling Contraction

South Africa’s purchasing managers’ index remained below a key level for a third month in November, indicating that factory output probably contracted in the fourth quarter, Kagiso Tiso Holdings said.

The seasonally adjusted index rose to 49.5 from 47.1 in October, 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 three economists surveyed by Bloomberg was for the index to rise to 47.6.

The South African Reserve Bank held its benchmark lending rate at the lowest level in more than 30 years last month as quickening inflation left little room to cut borrowing costs to boost growth. Mining output fell in the third quarter and manufacturing, which makes up 15 percent of the economy, rose an annualized 1.2 percent after contracting in the previous three months, according to the nation’s statistics agency.

Purchasing managers’ index “readings in the euro zone, the leading foreign market for our locally-produced goods, remains in contraction,” Abdul Davids, head of research at Kagiso Asset Management in Cape Town, said. “The declining trend in the average PMI suggests that the manufacturing sector’s contribution to fourth quarter gross domestic product could be lower than the third quarter.”

Mining declined an annualized 12.7 percent in the third quarter because of strikes at gold and platinum mines, the worst since the end of apartheid in 1994, the statistics agency said last week. The economy expanded at an annualized 1.2 percent, the slowest pace since the nation was in a recession in 2009.

The index measuring business activity gained 2.7 points to 45.9, Kagiso said. The new sales orders index rose 2.4 points to 47.7, while the employment sub-index increased to 52, it said. The price sub-index rose to 79.5.

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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