South Africa: PMI increases to 11-month high in September, albeit remaining in contractionary terrain
October 5, 2020
The South Africa IHS Markit Purchasing Managers’ Index (PMI) increased to 49.4 in September from 45.3 in August, logging the best reading in 11 months. Despite the rise, the index remained below the critical 50-threshold, that separates expansion from contraction in business activity.
September’s result was largely driven by smaller declines in output and new orders, with the latter dropping at the softest pace in 10 months as demand started to pick up amid the easing of Covid-19-associated restrictions. Subsequently, firms grew more confident about a rise in output in the coming year, prompting businesses to expand input buying for the first time in 13 months, albeit only marginally. That said, companies cut employment once again, amid a reduction in backlogs. The rate of job shedding was the softest since March, however. On the price front, input cost inflation rose to a five-month high, largely reflecting materials shortages and increased input demand, while firms increased output charges for the first time since April.
Commenting on September’s reading, David Owen, economist at IHS Markit, noted:
“Expansions in output and demand will be needed to help businesses revive job markets though, as employment continued to fall steeply. A rise in jobs will likely appear after an increase in economic activity, as firms will need time to recoup losses from the pandemic.”