South Africa’s industrial production plunged to a 14-month low in July driven down by worsening Covid-19 lockdown restrictions due to the third wave, and the unprecedented civil unrest.
The Absa Manufacturing purchasing manufacturers index (PMI) fell sharply to 43.5 in July from 57.4 in June, signalling the steepest deterioration in business conditions since May 2020.
Absa said July was a particularly challenging month, with the broader economy and the manufacturing sector hit by several supply-side and confidence shocks.
The government ramped up the lockdown restrictions to Alert Level 4 for the whole of July as the third wave of Covid-19 had seen a dramatic increase in new infections driven by the Delta variant.
Then in mid-July, civil unrest engulfed KwaZulu-Natal and Gauteng following the arrest of former president Jacob Zuma, resulting in plunder of hundreds of shopping malls and distribution centres.
The riots disrupted supply chains, industrial output and the demand for manufactured goods.
Absa said the magnitude of the monthly decline was worse than during the hard lockdown in April 2020 when PMIs across the globe were propped up by a big increase in the supplier deliveries index.
It said the July PMI reading suggested that these factors vastly outweighed the positive spillovers to parts of the manufacturing sector from robust mining sector activity amid elevated commodity prices.
Both business activity and new sales orders fell sharply, reflecting the negative impact of tighter Covid-19 restrictions that have hit leisure and hospitality sectors in particular, as well as civil “Indeed, excluding the unprecedented trough in April 2020 during the height of SA’s hard Covid-19 lockdown, the business activity index sank to an all-time low series since September 1999," Absa said.
“Both the lockdown restrictions and the riots would have hurt orders for manufactured goods. Respondents also reported a loss of export sales.
“After a terrible July, the lifting of some of the level 4 restrictions and calm returning to KZN and Gauteng should lift factory output from August.”
BUSINESS REPORT ONLINE