Easing lockdown lifts South Africa's Absa PMI in June
JOHANNESBURG - South Africa’s seasonally-adjusted Absa Purchasing Managers’ Index (PMI) expanded in June as an easing of coronavirus restrictions lifted business activity and sales.
The index, which gauges manufacturing activity in Africa’s most industrialised economy, rose to 53.9 points in June from 50.2 points in May.
Despite the uptick, many respondents reported that production levels remained below normal capacity.
“The further rise in June merely means that a solid month-on-month increase was likely recorded,” analysts at Absa said of the survey.
“Indeed, continued restrictions in some non-manufacturing sectors of the economy (for example the hospitality industry) still weighed on demand and limited the need to ramp up production.”
South Africa imposed a strict lockdown in late March to curb the spread of the coronavirus but has since eased some of the restrictions. From June 1, much of the economy was allowed to return to full capacity.
The improvement in the Absa PMI came a day after data showed first quarter gross domestic product contracted again, with the slowdown stretching back to mid-2019, before the coronavirus struck.
The rand edged firmer early on Wednesday, shaking off data revealing the economy was already in contraction before the coronvirus lockdown as investors looked to pocket the local unit’s high yield while awaiting key data globally.
At 0720 GMT (9:20am) the rand was 0.21% firmer at 17.3100 per dollar, having hit a three-session low on Tuesday after economic data showed gross domestic product had contracted for a third consecutive quarter in the first three months of the year.
Africa’s most advanced economy has now shrunk in four out of the last five quarters, and is also on the cusp of a debt crisis as the government borrows more to plug budget deficits enlarged by the lockdown to curb COVID-19 now in its fourth month.
“The deepening of the recession is set and thus priced into the ZAR exchange rate,” said Elisabeth Andreae of German bank Commerzbank.
“However, markets are likely to be interested above all in how quickly the economy will come out of the trough - in particular in comparison to others. This is likely to be above all a question of time and (financial) resources.”
While globally focus will be on purchasing managers’ index releases (PMI) and the release of the minutes of the Federal Reserve’s last policy meeting, the local calendar sees the publication of car sales and a manufacturing survey.