Alarm­ing ac­cel­er­a­tion in busi­ness de­cline

The Star Early Edition - - NEWS - Ka­belo Khu­malo

THE STAN­DARD Bank Pur­chas­ing Man­agers’ In­dex (PMI) yes­ter­day showed pri­vate sec­tor busi­ness ac­tiv­ity in South Africa de­clined for the third suc­ces­sive month in June, with the rate of con­trac­tion ac­cel­er­at­ing the fastest since April last year.

The bank said its data showed the PMI slowed to 49 points last month, down from the 50.2 points in May, charg­ing that this could be at­trib­uted to a re­duc­tion in the vol­ume of in­com­ing new busi­ness for the first time since Oc­to­ber last year.

It said new ex­port or­ders de­clined for the eighth con­sec­u­tive month.

Stan­dard Bank forex strate­gist Shireen Dar­ma­lingam said it was wor­ry­ing that four sub-com­po­nents of the PMI recorded neg­a­tive con­tri­bu­tions last month which marked the sixth con­sec­u­tive monthly de­cline in the in­dex.

“The em­ploy­ment sub-com­po­nent re­flected the largest de­cline in June, fol­lowed by out­put and new or­ders. Stocks of pur­chases also fell, al­though its sub­trac­tion from the over­all in­dex was more muted in June. We ex­pect the in­dex to re­main pres­sured as the SA econ­omy bat­tles with low busi­ness con­fi­dence and slow eco­nomic ac­tiv­ity as re­flected in the re­cent re­ces­sion­ary quar­ter one GDP data,” Dar­ma­lingam said.

The PMI is a com­pos­ite in­dex cal­cu­lated as a weighted av­er­age of five in­di­vid­ual sub-com­po­nents.

The bank said in­fla­tion­ary pres­sures in the pri­vate sec­tor re­mained weak last month, de­spite strengthening slightly com­pared with May. In­put and out­put prices rose at the fastest

Stan­dard Bank PMI shows pri­vate sec­tor on the back foot for third suc­ces­sive month

rates in four and five months re­spec­tively, al­beit ones that were still among the weak­est seen over the sur­vey his­tory.

On Mon­day, the Absa man­u­fac­tur­ing PMI also plunged to 46.7 points last month from 51.4 points recorded in May, largely due to slug­gish new or­der sales and lower busi­ness ac­tiv­ity. Absa’s PMI busi­ness ac­tiv­ity in­dex eased to 45.4 points last month from the 52.3 points recorded in the pre­vi­ous month.

Steel and Engi­neer­ing In­dus­tries Fed­er­a­tion of South Africa (Seifsa) se­nior econ­o­mist Tafadzwa Chiban­guza said the fun­da­men­tals of the South African econ­omy re­mained too weak to sup­port the man­u­fac­tur­ing sec­tor.

“At a deeper glance, this weak­ness is a func­tion of a weak econ­omy. This was also very ev­i­dent in Seifsa’s first-quar­ter re­view of the met­als and engi­neer­ing sec­tor, wherein those sub-in­dus­tries with lower ex­port-to-out­put ra­tios and more re­liant on the do­mes­tic econ­omy for or­ders per­formed the worst and, in fact, con­tracted in all in­stances,” Chiban­guza said.

“Un­for­tu­nately, the stronger rand in June would not have contributed any up­side to ex­port prospects, hence the broad de­te­ri­o­ra­tion in the PMI in­dices. Man­u­fac­tur­ers would have faced head­wind at home from a slow­ing econ­omy which is in a tech­ni­cal re­ces­sion and out­side of its bor­ders be­cause of a stronger rand.”

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.