JOHANNESBURG - South Africa's troubled economy received a further body blow yesterday after the Absa manufacturing purchasing managers index (PMI) fell to 47.9 points in June from 49.8 points in May.
The index dipped to the weakest in three months and further saw the PMI falling into contraction territory.
The activity data showed that every sub-component worsened between May and June. The business conditions expected component particularly registered a sharp fall, declining to a seven-month low last month.
The index tracking expected business conditions in six months’ time also recorded a nosedive. The index declined for a fourth consecutive month to reach 55.7 points in June – a staggering 23.4 points below the multi-year record high level of 79.1 points recorded in February this year.
The employment index also fell, after remaining more or less unchanged for the preceding three months. Senior emerging markets economist at Capital Economics William Jackson said that the PMI fall in June provided further evidence that the slump in the economy recorded during the first quarter was followed by further weakness in the second quarter. “We still expect the economy to strengthen over the second half of the year. “The downside risks to our growth forecast of 2 percent for the year as a whole are mounting,” Jackson said.
The manufacturing sector was one of the main contributors to the 2.2 percent decline in gross domestic product (GDP) in the first quarter. The sector fell 6.4 percent in the quarter. International ratings agency Fitch last month took a dim view of South Africa’s economy this year, revising its outlook from the 2.3 percent growth it forecast previously to 1.7 percent.
Fitch, which said South Africa’s first-quarter numbers necessitated a downward revision of the 2018 forecast, joined Nedbank and NKC African Economics, which have cut their full-year forecasts from 1.9 percent to 1.5 percent following, the first-quarter GDP data. Investec economist Lara Hodes said the latest PMI reading was in line with global trends, with the global manufacturing PMI recording a ninemonth low in May. “Although second-quarter results so far have been disappointing, we are forecasting a small rebound in growth for this year, commencing in the third quarter, which should boost demand moderately in the second half of the year,” Hodes said.