Private sector business conditions little changed in December
The latest IHS Markit SA PMI shows output was broadly stable, but fears of further Covid-19 restrictions weighed heavily
SA’s private sector business activity was largely stable in December, with business confidence under some pressure from Covid-19, which is also disrupting supply chains, a survey showed on Wednesday.
The latest IHS Markit SA purchasing managers’ index (PMI), an economywide gauge of business conditions, fell to 50.2 index points in the final month of 2020, from 50.3 in November, but remained in expansionary territory.
The PMI gives insight into private sector business performance, through a survey of about 400 private sector companies. A reading of more than 50 shows overall improvement in the sector, with the figure derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.
SA businesses struggled to make gains in December, as weak demand and issues sourcing raw materials meant total output had been broadly stable since November, said IHS Markit economist David Owen.
“Notably, business confidence was hit by firms’ concerns that a sharp rise in Covid-19 cases could lead to a second wave of restrictions,” he said.
The largest component of the PMI, the new-orders index, noted broadly unchanged sales volumes in the final month of 2020, as some firms reported an expansion but others indicated a decline, IHS Markit said.
There were reports that firms were hindered by shortages of a range of raw materials, largely due to Covid-19 and its effect on global supply chains. Shortages of inputs also affect companies’ buying decisions in December, the statement said, and purchasing activity declined for the first time since August.
“While PMI data over the fourth quarter of 2020 points to an easing to the downturn, demand indicators suggest that the economy has far to go to recover from the pandemic,” said Owen.
“Moreover, should restrictions be reimposed, the country could face a second decline in activity over the first quarter of 2021,” he said.
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