South Africa: PMI increases in August
September 3, 2020
The South Africa IHS Markit Purchasing Managers’ Index (PMI) increased to 45.3 in August from 44.9 in July, logging the best reading in six months. However, the index remained entrenched below the critical 50-threshold, indicating a deterioration in operating conditions in the private sector compared to the previous month.
August’s print was mainly driven by a softer contraction in output, although the decline remained steep, reflecting continued Covid-19 restrictions. While export demand fell at a quicker clip than in July, the decline in overall sales was the slowest in six months. For its part, employment decreased sharply in August as firms shed jobs amid a reduction in backlogs. The rate of job shedding was the softest since April, however. On the price front, input cost inflation picked up pace due to currency weakness, while output charges fell in August owing to frail demand. Lastly, sentiment in the sector was broadly unchanged in August. Although firms see rising output in the coming year due to the easing of coronavirus measures, the overall confidence was still below the historical trend.
Commenting on August’s reading, David Owen, economist at IHS Markit, noted:
“The imposition of stricter Covid-19 measures across South Africa in July and August, after having eased in June, mean we are increasingly seeing a long-tailed recovery in the economy according to the PMI.”
Author: Hanna Andersson, Economist