South Africa: Private sector activity eases in February
March 3, 2021
The South Africa IHS Markit Purchasing Managers’ Index (PMI) dropped to 50.2 in February from 50.8 in January. As a result, the index remained somewhat above the critical 50-treshold, indicating only a fractional improvement in business conditions from the previous month, hinting at cooling momentum.
February’s reading largely came on the back of a softer expansion in output compared to the previous month, while new business was broadly unchanged. Consequently, firms cut jobs at a quicker rate in February, with employment falling to a four-month low amid a decrease in outstanding work. Meanwhile, input cost inflation rose sharply in the month amid material shortages, while output charges rose at the quickest pace since October last year as firms passed on costs to clients. Lastly, despite this, firms were optimistic regarding the 12-month outlook, with sentiment rising to the strongest since before the Covid-19 outbreak.
Commenting on the prospects for the South African private sector, David Owen, economist at IHS Markit, noted:
“Vaccines could provide a ray of light and encourage greater business investment, but for now, economic growth remains mild."
Author: Hanna Andersson, Economist