South Africa: Business conditions deteriorate more rapidly in July
August 5, 2019
In July, the IHS Markit Purchasing Managers’ Index (PMI) slid to 48.4 in July from 49.7 in June. Thus, the index moved further below the 50-point threshold, indicating a more marked deterioration in private-sector business conditions.
July’s downturn reflected a faster fall in new orders and overall output compared to the previous month. New orders contracted at the sharpest rate in nine months amid a marked drop in demand, while production tumbled for the third consecutive month. Along with reduced demand, workers’ strikes and higher inflation curbed the level of output. Firms hired less workers in response. Meanwhile, input costs rose slightly on an upturn in wages and higher prices for steel and electricity, although the overall rise was softer compared to June. The increased cost burden prompted firms to raise output prices. Expectations for future production were less upbeat in the month amid lower sales and deteriorating economic sentiment, although remained in positive terrain.
Author: Nihad Ahmed, Economist