Private-sector gloom deepens as PMI falls again
The health of the South African private sector is expected to continue to deteriorate, given weak economic conditions, a business survey shows.
The Standard Bank purchasing managers’ index (PMI), which looks at the whole economy, remained in contraction territory for a fifth consecutive month, dropping slightly to 48.4 in December from 48.8 in November.
The survey, sponsored by Standard Bank and produced by Markit, provides an early indication of operating conditions in SA.
Readings above the neutral 50-point mark show an expected expansion in business conditions.
According to Standard Bank, December’s survey data indicated the fastest decline in 20 months.
The survey showed output fell rapidly — at the fastest rate in 21 months — while new business also decreased.
The employment subindex fell for the second month, and at a faster pace than in November.
Standard Bank economist Thanda Sithole said: "The decline in the PMI is likely to persist in the near term amid a deteriorating fiscal outlook and elevated risk of further sovereign ratings downgrades."
He added: "However, further declines in the private sector PMI could potentially be averted should the governing party work tirelessly to restore lost business confidence."
In 2017 the economy-wide PMI averaged 49.8, higher than the 49.7 average for 2016 but still reflecting a lack of economic optimism and generally weak domestic economic activity.
SA’s economic struggles are out of step with a global recovery, with eurozone and Chinese manufacturing PMIs released this week showing robust manufacturing activity in those economies.
The Absa PMI, which focuses on the manufacturing sector, is due out in a week’s time.