South Africa: PMI drops to lowest level since July in December; conditions deteriorate
The IHS Markit Purchasing Managers’ Index (PMI) dropped to a five-month low of 48.4 in December from November’s six-month high of 51.7. Consequently, the index fell below the neutral 50-threshold, signaling a deterioration in business conditions from the previous month.
December’s downturn was largely due to a sharp rise in Covid-19 infection rates following the discovery of the Omicron variant, which led to a decline in sales as clients felt less inclined to spend, and tourism weakened due to renewed travel restrictions. This in turn led to a sharp drop in output. Additionally, new orders also declined in December. More positively, employment levels were largely unchanged, dropping only marginally. Turning to prices, costs continued to rise due to higher prices for inputs—namely steel, aluminum, fuel and transport. The burden was largely passed on to customers, leading to a steep uptick in selling prices. Lastly, firms remained optimistic with regard to activity expectations, despite confidence slipping to a four-month low.