Picture: 123RF/BLUE BAY
Picture: 123RF/BLUE BAY

Business conditions in the private sector moved into positive territory for the first time in more than a year in October, as an easing of lockdown restrictions supported a recovery in activity, according to the latest IHS Markit SA purchasing managers’ index (PMI).

The economy-wide gauge of business conditions rose to 51 index points in October from 49.4 in September, the first time it has edged above the neutral mark since April 2019.

The PMI gives an indication of private sector business performance by surveying 400 companies across the economy on indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. A reading above 50 shows overall improvement.

Central to the improvement were increases in new orders and output. New business expanded for the first time in 28 months as customer demand improved after the easing of Covid-19 restrictions, according to IHS Markit.

"The economic recovery in the SA private sector gained momentum in October as looser Covid-19 restrictions supported expansions in output and new orders," Andrew Harker, economics director at IHS Markit, said in a statement.

But the pandemic continued to affect new export orders, which fell again in October. A number of SA’s trading partners, particularly in the EU, have renewed restrictions as their countries experience a resurgence of Covid-19.

On the employment front, though job cuts continued at the start of the final quarter of the year, the pace of reduction in employment slowed to the weakest for seven months.

"The latest data suggest that GDP could grow again during the final three months of 2020, after an anticipated ‘mechanical’ rebound in the third quarter," said Harker. "That said, caution is provided by the situation in other parts of the world, where a second wave of the virus has occurred."

The result follows the release earlier this week of the Absa PMI, a gauge of sentiment in the manufacturing sector. The Absa PMI also showed a sustained pick-up in the manufacturing sector, rising to a record high of 60.9 points in October, though economists warned that renewed economic restrictions in markets such as Europe might weigh on the recovery.

donnellyl@businesslive.co.za

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