South Africa: Private sector activity contracts at a softer pace in February
The IHS Markit Purchasing Managers’ Index (PMI) inched up to 48.4 in February from 48.3 in January. Nevertheless, it remained below the critical 50-threshold that separates deterioration from improvement in private sector business conditions, where it has been for the past ten months.
The improvement largely reflected a softer drop in new orders and the highest level of business confidence since March 2018. That said, activity fell for the 10th consecutive month as business continued to struggle with power outages, which prompted firms to cut employment at the fastest pace since the series began in July 2011. On the price front, input cost inflation reached and eight-month high in February amid a weaker rand and delays in Chinese imports due to coronavirus. Firms responded by increasing output prices at the fastest rate in 16 months.
With regards to January’s developments, David Owen, Economist at IHS Markit, noted:
“Meanwhile, the coronavirus outbreak last month started to have a notable impact on economic factors. With China being South Africa’s largest trade partner, the shutdown of factories and offices in the world’s second-largest economy led to a steep lengthening of input delivery times. Port congestion at Durban and other locations meant that many businesses were forced to limit activity, with exports to China also decreasing.”