Africa’s manufacturing sector has declined, with the PMI falling sharply from the previous month

In September 2023, the African manufacturing PMI was 48.4%, down 1 percentage point from the previous month, and failed to continue the momentum of the previous month. Since the third quarter, the trend of Africa’s manufacturing PMI has been unstable, with obvious fluctuations, and the index level has not exceeded 50%, showing that the downward pressure on Africa’s manufacturing industry has emerged. From the perspective of major countries, Nigeria’s manufacturing growth accelerated from the previous month, and the manufacturing PMI rose to more than 51%. Egypt and South Africa manufacturing PMI compared to the previous month have declined to varying degrees. The decline in South Africa’s manufacturing PMI was particularly pronounced, with the index falling below 46% and a quarter-on-quarter decline of more than 4 percentage points.

Continued upward oil prices have led to a significant increase in inflationary pressures in South Africa and Egypt, adversely affecting the recovery of manufacturing in both countries. South Africa’s Ministry of Mineral Resources and Energy has confirmed that due to multiple factors such as rising international crude oil prices and fluctuations in the South African rand exchange rate, South Africa’s fuel prices will rise sharply from October. Egypt’s annual inflation rate rose to 39.7% in August from 38.2% the previous month, according to the Central Public Mobilisation and Statistics Bureau. Annual urban inflation rose to 37.4% from 36.5%, a record high for the third consecutive month.

The volatility of African manufacturing industry comes from its high dependence on the world economy, and the impact of global demand contraction, commodity fluctuations and US dollar interest rate rise on African countries is more obvious. The recent admission of the African Union as a member of the G20 fully demonstrates that Africa has become an important regional economy that the world has paid more attention to. In this context, African countries need to gradually get rid of external dependence, achieve self-development through expanding domestic demand and industrial transformation, and enhance the resilience and internal impetus of African economic development.

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The manufacturing sector in the Americas continued to recover, but the PMI remained below 50%

In September 2023, the manufacturing PMI in the Americas was 48.9%, up 1 percentage point from the previous month, rising for three consecutive months, but still below 50%, showing that the manufacturing industry in the Americas has continued to recover since the third quarter, but the recovery is relatively weak. Data from major countries show that the US manufacturing PMI increased significantly month-on-month, which is the main driving force for the rise of manufacturing PMI in the Americas; Manufacturing PMI in Brazil, Canada and Mexico all declined to varying degrees from the previous month.

The ISM report shows that the U.S. manufacturing industry has continued to recover since the third quarter. In September, the US manufacturing PMI was 49%, up 1.4 percentage points from the previous month, rising for three consecutive months, and the increase has expanded from the previous month. The change in the sub-index shows that the US manufacturing production and demand have accelerated signs of recovery from the previous month, and the recovery of production is still stronger than demand. The production index rose to more than 52%, and the new orders index rose to more than 49%, with month-on-month increases of more than 2 percentage points.

The continued recovery of the US manufacturing industry may provide a certain reference basis for the Federal Reserve to continue to raise interest rates. Since the start of last year, the Fed has raised real interest rates by 525 basis points. The federal funds rate is now between 5.25% and 5.5%, its highest level since 2001. The continuous interest rate hike has objectively brought about the easing of inflation pressure. In August 2023, the US CPI rose 3.7% year-on-year, the index level is significantly lower than the same period in 2022, but higher than the 3.2% year-on-year increase in July. On a month-on-month basis, CPI also rose to 0.6 per cent from 0.2 per cent in July. The current level of CPI is approaching the Federal Reserve’s 2% inflation target, and with the expectation of a continued recovery in the U.S. manufacturing sector, the possibility of the Federal Reserve continuing to raise interest rates remains. But the current level of interest rates is also troubling the U.S. economy. First, reflected in the increase in the number of corporate bankruptcies, continuous interest rate increases the financing costs of enterprises, enterprises are unable to repay, increasing the risk of bankruptcy. By the end of August 2023, more than 450 U.S. companies had filed for bankruptcy protection, more than the number of bankruptcies in the previous two years combined, according to Guggenheim Investments. The second is the decline in consumer confidence. According to the Conference Board, the U.S. consumer confidence index fell from 108.7 to 103 in September, the biggest monthly decline since December 2020.