South Africa: PMI rises in July but remains in negative territory
August 5, 2020
The South Africa IHS Markit PMI rose to 44.9 in July from 42.5 in June, marking the best reading in five months. That said, the index remained well entrenched below the critical 50-threshold, indicating a deterioration in operating conditions in the South African private sector compared to the previous month.
July’s reading largely came on the back of a softer decline in output as some lockdown restrictions were eased. Moreover, new orders fell at slower rate in July, albeit the drop was still sharp amid a steep contraction in new export orders amid continued weak demand. Meanwhile, although firms continued to shed jobs as business were temporarily closed due to coronavirus restrictions, they did so at a slower pace. On the price front, input costs increased in July due to increasing raw material and fuel prices, and currency weakness. On the other hand, output charges decreased over the previous month amid firms’ efforts to drive up consumer spending. Lastly, sentiment in the sector rose to a four-month high in July as firms grew more optimistic with regards to the outlook for activity in the year ahead. That said, overall confidence was still well below the historical trend.
Author: Hanna Andersson, Economist