The South African economy continued to grow at a solid pace in May despite the rate of expansion in private sector business performance slowing slightly from April’s recent peak. Photo: Free Images
The South African economy continued to grow at a solid pace in May despite the rate of expansion in private sector business performance slowing slightly from April’s recent peak. Photo: Free Images

Economy is growing at a solid pace as SA output increases

By Siphelele Dludla Time of article published Jun 4, 2021

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THE SOUTH African economy continued to grow at a solid pace in May despite the rate of expansion in private sector business performance slowing slightly from April’s recent peak.

The IHS Markit purchasing managers index (PMI), released yesterday, edged down to 53.2 points in May from a record high of 53.7 points in April, however, this was the second-highest since November 2012.

IHS Markit said surveyed businesses reported a solid increase in output in May, with the rate of growth one of the quickest recorded since data collection began in 2011.

It said confidence towards future output remained robust in May, growing at the second-quickest rate since October 2014 and was the second-highest in more than three years.

IHS Markit said firms were largely expectant of a recovery in economic conditions over the coming year as the vaccine roll-out continues.

With this in mind, workforce numbers increased at the fastest rate since November 2012.

Despite the PMI falling in May, IHS Markit said the reading signalled another solid improvement in the health of the private sector economy.

New orders rose for the second month in a row, supporting a further solid increase in workforce numbers.

IHS Markit economist David Owen said South Africa’s economic performance in the second quarter remained strong, signalling that businesses were continuing to recover from the impact of the pandemic.

He said job numbers rose at a quicker rate in May as firms looked to rehire staff following severe losses over the past year.

“In fact, the rate of job creation was the fastest since November 2012,” Owen said. “This was often linked to strong optimism that business activity will continue to expand as domestic and global vaccination efforts continue.”

However, the headwind of rising cost pressures continued to gather speed, with the latest uptick in input costs the fastest since June 2016 amid supply-side problems. As a result, firms raised their selling charges at the sharpest pace for almost five years.

Owen said supply shortages were evident, with firms mentioning a lack of availability of raw materials such as metals and timber.

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