Private-sector business conditions improved in June
But the latest IHS Markit SA purchasing managers’ index remains in negative terrain
Business conditions in the private sector improved as lockdown measures eased in June, rising off record lows in the previous month.
The latest IHS Markit SA purchasing managers’ index (PMI), an economy-wide gauge of business conditions, recovered in June to reach 42.5 points, its highest levels in three months and the start of restrictions to slow the spread of the coronavirus.
Although this was a marked improvement from May — when the index reported the lowest reading on record — the June PMI remained in contraction territory.
The PMI gives insight into private-sector business performance, through a survey of 400 private sector companies across the economy. A reading of more than 50 shows overall improvement in the sector. It is derived from indicators for new orders, output, employment, suppliers’ delivery times, and stocks of purchases.
The series measuring employment in the private sector continued to decline. This is not a good sign for SA, which reported record unemployment levels in the first quarter of this year — before the advent of the first phase of lockdown restrictions that halted most business activity.
“Employment also remains a difficult area, having fallen for eight months in a row,” said David Owen, economist at IHS Markit, in a statement on the figures. “Job shedding did ease in June, but was still marked, with firms suffering from a squeeze on margins and subdued sales.”
The outcome for the economy-wide index follows that of the Absa PMI, which reflects conditions in the manufacturing sector, released earlier this week.
The Absa PMI showed a sharp monthly recovery in June — reporting its best performance in seven years. But despite the pick-up, survey respondents noted that production was still below normal capacity.
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