South Africa Factory Index Suggests Price Pressures Have Peaked

The index that tracks purchasing prices in South Africa's manufacturing industry fell to its lowest level in more than three years in December.

Absa Group said the gauge declined in November. Before the coronaviruses outbreak disrupted supply chains and a week of deadly riots, the lowest reading was in November.

The lender said that lower oil prices and a stronger rand bode well for a moderation in producer price inflation in the first few months of the next decade. Statistics South Africa shows that the producer and consumer prices increased in November.

Absa said the gauge that tracks expected business conditions in six months rose to 54.9 in December from 51.7 in November.

The purchasing managers index went up. The "underlying picture is more mixed", it said.

The business activity index deteriorated as a result of the sustained and intense power outage.

The supplier deliveries index rose while new sales orders fell. Absa says that the index is inverted so slower deliveries cause it to increase.

There is a chance of more supply chain disruptions due to the reopening of the Chinese economy that has resulted in surging Covid-19 infections.