South Africa: PMI rises further in June
July 3, 2020
The South Africa IHS Markit PMI pulled up from an all-time low of 32.5 in May to 42.5 in June. That said, the index remained well below the critical 50-threshold, hinting at a sustained deterioration in operating conditions across the South African private sector at the end of Q2.
The improvement was broad-based and predominantly driven by the easing of lockdown restrictions that allowed firms to begin a gradual ramp up of operations. As a result, both output and new orders contracted at a milder pace in June, as firms saw an uplift in market activity amid stabilizing demand conditions. Similarly, private sector companies slowed the pace of job shedding at the end of Q2, although it remained significant by historical standards. With regards to prices, companies were able to lower output charges as input costs moderated. Lastly, sentiment climbed into positive territory in June, with private sector firms now confident that activity will grow in the next 12 months.
Commenting on the private sector outlook, David Owen, an economist at IHS Markit, said:
"The reversal of government lockdown measures led to a significant easing in the economic decline in June, latest PMI data suggested […]. This relaxation of COVID-19-related measures came despite the continued rise in case numbers, as President Ramaphosa reportedly opted to preserve economic livelihoods and boost the ailing South African economy. Sentiment has since crept back into positive territory, as firms were upbeat that markets will start returning to normal. However, demand levels still remain weak, and the growing surge of COVID-19 cases will likely worry consumers going forward.”
Author: Almanas Stanapedis, Economist