It was another day of gloomy news for the South African economy as the S&P Global South Africa Purchasing Managers' Index (PMI) data revealed that business activity in March declined to 49.7 from 50.5 in February.
The 50-point mark divides growth from contraction.
Once again, rolling power cuts were the dark cloud haunting businesses, as well as inflationary pressures.
South Africa has been experiencing load shedding on a daily basis since the onset of this year by ailing state power utility, Eskom, placing strain on many aspects of the economy.
David Owen, senior economist at S&P Global Market Intelligence, said: ‘’Output returned to contraction after stabilising in the previous month, as firms highlighted that ongoing load shedding (power cuts) had curtailed activity.’’
Owen said recent price data suggest that the country could face another wave of inflation, with business costs rising at the fastest rate since July 2022.
‘’Exchange rate weakness, higher fuel costs and weak supply chain conditions led to a steep rise in purchase prices,’’ he said.
“Purchasing activity fell for the fifth time in six months, while stocks of purchases ticked up slightly from February amid efforts to build inventories. On the price front, both input costs and output charges rose at the fastest rates in eight months amid exchange rate weakness, higher fuel costs and weak supply chain conditions. On a brighter note, business sentiment increased in March, after easing for five months in a row, which encouraged firms to raise their employment numbers slightly,” S&P Global said.
The S&P Global data comes hot on the heels of Absa’s PMI released on Monday, which also showed a contraction, dipping below the 50 point mark.
Compiled by the Bureau for Economic Research, Absa’s PMI data showed that business activity in the manufacturing sector plunged for the second time in a row for the month of March due to Eskom’s load shedding.
Manufacturing is the country’s fourth biggest sector, contributing 14% to GDP.
In January this year, the PMI was at a high of 50.5 points, declining to 48.7 points in February, and now March, recording a lower 48.1 points.