Private sector growth hit hard as activity contracts yet again

PRIVATE sector growth in the economy took another deterioration in November as activity contracted for the seventh consecutive month.

The Standard Bank purchasing managers’ index (PMI) fell to 48.6 points in November from 49.4 in the previous month.

The decline was in line with the Absa PMI which edged down to 47.7 in November from 48.1 the previous month as demand and new sales orders remained under pressure, pointing to the fourth consecutive month of contraction in factory activity.

A reading above 50 indicates expansion in business activity and below 50 indicates that it is generally declining.

The Standard Bank PMI survey, produced by IHS Markit, showed that the decline in November was the steepest since July and the most in a year.

The PMI tracks business trends across private sector activity, including mining, manufacturing, services, construction and retail based on data collected from a representative panel of around 400 companies. The index tracks variables such as new orders, output, employment, supplier delivery times, inventories and prices.

The survey said both employment and stocks decreased. In terms of prices, overall input price inflation accelerated to a five-month high, mainly due to higher prices of fuel and metals as well as currency weakness. Accordingly, output charges ticked up.

The data comes after gross domestic product (GDP) contracted in the third quarter. The economy shrank an annualised 0.6 percent on quarter in the three months to September, following an upwardly revised 3.2 percent growth in the previous period.

Year-to-date, the GDP advanced 0.3 percent but the National Treasury expects it to grow 0.5 percent in 2019.

Mining, manufacturing and transport, storage and communication industries contributed the most to the GDP contraction.

Further nationwide load shedding hit primarily utilities, manufacturing, mining, agriculture and construction.

Statistics SA also pointed to weak growth in household spending.

Recent vehicle sales data for November also indicated consumers’ lack of desire to spend on durable goods persisted into the fourth quarter of the year.