Business, sales hit by stricter measures to curb infection surge

BUSINESS activity and sales were hit by the reintroduction of stricter measures in South Africa in June which saw the country put back to adjusted level 4 lockdown.

The IHS Markit Purchasers Managers Index (PMI) yesterday showed the first output fall in 2021, falling for the second consecutive month to 51.0 index points in June from 53.2 points in May.

Level 4 lockdown saw businesses in the hospitality, tourism and alcohol-related industries take a hit as restrictions on gatherings and sale of liquor were enforced.

Though it stayed above the 50 level that indicates expansion, the PMI signalled a loss of momentum in the rate of improvement in operating conditions across the private sector economy.

IHS said new business growth largely stalled after two successive months of expansion, while there was a renewed drop in export sales.

Raw material shortages led to a solid increase in backlogs, prompting firms to raise employment at the quickest rate since November 2012.

Supply issues and salary increases pushed up input prices at a marked pace in June, although the overall rate of inflation eased slightly from May’s recent high. Output charges continued to rise sharply as firms often passed these costs on to their customers.

The expansion was the ninth in as many months, but the weakest since March.

IHS Markit economist David Owen said business activity fell for the first time in six months amid stricter lockdown measures as the Covid third wave hit the economy in June.

Owen said more importantly, the fall in output was modest and softer than those seen last year.

“This suggests that the economy is becoming more resilient to the pandemic and may not suffer too badly from renewed lockdown restrictions,” he said.

“That said, the move to level 4 at the end of June will likely lead to a sharper decline in activity over July.”

Owen said supply shortages remained a key concern, with delivery times, backlogs, purchasing and prices all impacted in June.

Supply problems were also highlighted by survey panellists, meaning that some firms were unable to fulfil new orders. Output decreased for the first time in six months during June, as the tightening of Covid-19 measures hit customer demand.