JOHANNESBURG - South Africa's private sector growth in January rose the strongest in three months, as data released yesterday showed that output grew at the sharpest pace in more than four years.
The IHS Markit purchasing managers index (PMI) jumped to 50.8 points in January of 2021 from 50.2 points in December 2020.
The latest headline reading signalled a fourth successive monthly improvement in overall business conditions.
Moreover, the rate of growth was the second-quickest in over two-and-a-half years, weaker only than that seen last October.
The index, which is a composite single-figure indicator of private sector business performance, showed that the latest expansion was mostly driven by an increase in private sector output that was notably the fastest since December 2016.
IHS Markit said new orders continued to rise supported by efforts to fulfil outstanding work in January.
However, overall sales remained broadly flat for the second month in a row in January, as a number of companies highlighted that the pandemic continued to disrupt new business inflows
IHS Markit economist David Owen said businesses started 2021 with a focus on expanding output, grew at the sharpest rate from December 2016.
Nevertheless, Owen said the pandemic continued to take its toll on client demand, as new sales were broadly unchanged from the end of last year, meaning business activity was often directed to completing work in-hand.
"Cost-cutting efforts were widespread, particularly as input shortages and global supply problems led to a marked increase in raw material prices," Owen said.
"Consequently, both employment and purchasing activity were cut at a faster rate than in December.”
Meanwhile, employment continued to fall amid efforts by some companies to lower wage costs, with the rate of reduction accelerating for the first time since May 2020.
IHS Markit said the outlook for the forthcoming year of business activity picked up from December as firms remained hopeful of an easing in Covid-19 restrictions over the course of 2021.
Business confidence had already strengthened amid hopes of an easing in Covid-19 restrictions.
Concerns surrounding high case numbers, load shedding and inflationary pressures, however, led to pessimism at some firms, keeping overall expectations below the long-run average.
Owen said despite output expanding for only the second time in 21 months, businesses hope that growth would be more consistent over 2021 amid optimism that the Covid-19 pandemic would recede as vaccines were more widely distributed.
“That said, some firms highlighted the risks of load shedding and higher consumer prices in the near future,” he said.
BUSINESS REPORT