JOHANNESBURG (Multibagger) - South African manufacturing activity increased in September, recovering from the previous month's slump as demand rose and an interest rate cut boosted sentiment, the Absa-sponsored purchasing managers' index survey showed on Tuesday.
The seasonally adjusted PMI for the factory sector rose to 52.8 points in September from 43.6 in August, surpassing the crucial 50-point mark indicating growth.
"Both domestic and export demand showed signs of improvement... On the local consumer front, the recent interest rate cut adds to the expectation of a possible more positive demand story going forward," local bank Absa, which sponsors the survey, said in a statement.
"The positive PMI results suggest that the manufacturing sector is stabilizing after a turbulent period, although challenges remain, particularly in employment," Absa said in a statement.
The 9.2-point jump in the index in September more than made up for the 8.8-point drop in August.
## Analysis:
Investors should take note of the significant improvement in South African manufacturing activity, as indicated by the surge in the purchasing managers' index (PMI) for the factory sector. This turnaround is attributed to increased demand and a favorable interest rate cut, signaling a positive outlook for the sector. The rise in the PMI suggests that the manufacturing industry is stabilizing, presenting potential investment opportunities. However, challenges in employment still persist, warranting a cautious approach. Overall, this development could impact investment decisions in South Africa and provide insights for financial market participants.