South Africa Expected Business Conditions Surge to Two-Year High

(Bloomberg) -- An index tracking expected business conditions in six months’ time for the South African manufacturing industry jumped to the highest level since February 2022, on easing political uncertainty and expectations of improving demand.

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The gauge rose to 68.1 in June from 57.6 a month earlier, Absa Group Ltd. said on Monday.

After more than a month of uncertainty over who would be in a coalition government formed by the African National Congress after it lost its parliamentary majority in May 29 elections, President Cyril Ramaphosa on Sunday announced a new cabinet.

He allocated ministerial posts to business-friendly opposition politicians while retaining close ally Enoch Godongwana as finance minister and signaling his intent to revive sluggish economic growth.

The higher reading was also due to hope that domestic and global demand, which has been weak and kept the purchasing managers’ index in contractionary territory for a second straight month, may improve amid expectations of lower interest rates, the lender said.

Recent data shows inflation cooled in the US and several European countries, offering encouraging signs that central banks in those regions can ease monetary policy.

Domestically, an improvement in the purchasing price index indicates that easing cost pressures have been sustained, Absa said. Petrol and diesel prices fell at the start of June, with further declines expected in July, which would help alleviate pressure on costs, it said.

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