South Africa's private sector activity has contracted for the fifth month running
JOHANNESBURG – Private sector growth in the economy took another deterioration in September as activity contracted for the fifth month running.
The Standard Bank Purchasing Managers’ Index (PMI) fell from 49.7 points in August to 49.2 points in September, signalling a marginal but quicker deterioration in the buying and reselling of goods in the economy.
On Monday Absa said its manufacturing PMI which dropped to its lowest level since the 2008/09 recession to 41.5 points in September from 45.7 points in August due to a more rapid pace of contraction in production, new business and inventories amid subdued domestic demand and weakening global growth.
The Standard Bank PMI survey, produced by IHS Markit, showed that output and new orders both fell at accelerated, albeit still modest rates, but expectations for future output remained relatively weak.
This was the fifth monthly decline in business conditions in a row, and was the second-strongest recorded in this period.
Any figure greater than 50 points indicates an overall improvement of the sector.
Firms saw an extension of the decline in new orders during September, as latest data indicated the fifteenth successive monthly fall in total demand. Businesses also saw a renewed decline in new orders from foreign clients.
Standard Bank said anecdotal evidence indicated that some firms were negatively affected by unrest and political demonstrations during September.
But some also linked the contraction to a general slowdown in economic conditions as supply-side factors were also impacted during the month.
Job numbers and purchasing activity also decreased, while businesses reduced their selling prices for the first time since April.
Firms also said continuing demand weakness reduced their buying power and willingness to hire new workers.
Economist at IHS Markit, David Owen, said companies reduced activity at a quicker pace, while also curtailing input purchases and job numbers.
“The business outlook remained subdued in September. Sales have now dropped for 15 successive months and, whilst the level of sentiment was positive overall, many panellists noted that uncertainty in the economy dampened their forecasts for future activity,” Owen said.
“The latest survey results meant that the average PMI reading for the third quarter posted at 49.1 points, the lowest for the year so far, and suggested that third quarter gross domestic product growth will be modest at best.”
Businesses also reported a slight lengthening of delivery times, the eighth in as many months while input cost inflation slowed to a five-month low.
The survey showed that purchase prices rose at a relatively soft pace, with principal pressure coming from a deterioration in the exchange rate against the US dollar.
However, staff costs fell slightly due to lower new orders and a subsequent drop in commissions.