Business activity expanded for first time in three months
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BUSINESS activity in South Africa expanded for the first time in three months in September as improving economic conditions drove increased activity and customer demand.
The IHS Markit Purchasing Managers Index (PMI) rose to 50.7 points in September, from 49.9 points in August, buoyed by the easing of lockdown measures to level 2.
At 50.7 points, the index was above the crucial 50.0 mark for the first time since May, signalling a marginal improvement in operating conditions.
IHS said this was mainly led by renewed upturns in output and new orders, which together account for 55 percent of the PMI weighting.
It said the easing of lockdown measures to level 2 supported a slight rise in sales and drove a boost in business confidence to the highest in over six years.
As a result, IHS also said firms grew increasingly confident that the economy would continue to recover, as projections for future output climbed to their highest level since July 2015.
IHS Markit economist David Owen said the move to level 2 restrictions helped push the South African private sector back into growth territory in September.
Owen said output and new orders rose after lockdown measures and unrest led to steep declines in prior months, while input purchases neared stabilisation.
“However, South African firms continue to face supply shortages that weighed on growth in September, driving lower output at a number of companies as well as higher backlogs, longer delivery times and increased prices.
“With supply issues remaining global, these are likely to hinder the economic recovery for some time.
“On a positive note, business expectations for the coming year jumped to their strongest level since July 2015, to signal that firms are looking past these supply issues and projecting a robust upturn in activity from current levels.”
However, IHS said there were still areas of weakness in the private sector that meant the overall recovery was subdued.
It said supply shortages continued to hinder output at many firms, while orders from foreign clients fell for the fourth month running.
In addition, sales growth was mixed at the broad sector level, with both manufacturing and services registering an upturn, while construction and wholesale and retail saw further declines.
Price pressures on inputs, meanwhile, accelerated for the first time in four months, with overall costs up sharply.
IHS said a weaker exchange rate against the US dollar notably exacerbated the rate of purchase price inflation, following rises in energy costs and the price of raw materials such as steel.
BUSINESS REPORT ONLINE