South Africa: PMI falls at the fastest pace in the survey's history in April
May 6, 2020
The IHS Markit Purchasing Managers’ Index (PMI) fell from 44.5 in March to 35.1 in April, the lowest print in the survey’s history, which started in July 2011. Thus, the index fell further below the critical 50-threshold that separates deterioration from improvement in private sector business conditions, where it has been for the past year.
April’s deterioration reflected the sharpest fall in output on record, as lockdown conditions inhibit work, while new orders plummeted largely due to restrictions. Meanwhile, businesses cut work force numbers at an unprecedented rate and reduced wages in an effort to reduce expenses. On the price front, input costs rose as a result of the weaker rand, while output costs increased as companies passed additional costs onto consumers.
With regards to January’s developments, David Owen, Economist at IHS Markit, noted:
"A better estimate is the Output Index, which posted 23.7 in April. However, even this figure does not illustrate the strain of businesses reporting lower output. With the lockdown in place, many firms simply shut down operations, rather than partially reducing output. As such, the magnitude of the collapse in economic activity could be even more cataclysmic than the index suggests, with jobs and revenues set to suffer greatly as well."
Author: Nicolás J. Aguilar, Economist