By Hugh Lawson, Reuters.
South Africa’s private sector activity contracted for the first time in seven months in October, as firms faced a renewed downturn in output and orders, S&P Global reported on Wednesday.
The South Africa Purchasing Managers’ Index (PMI) fell to 48.8 in October from 50.2 in September, slipping below the 50.0 mark that separates growth from contraction.
Despite a strong improvement in supplier delivery times and a slight moderation in cost pressures, business activity weakened. The suppliers’ delivery times subindex reached its joint highest level since data collection began more than 14 years ago.
Firms cited reduced logistics issues and lower input demand as contributing factors.
However, the overall business environment deteriorated as new orders fell at the sharpest rate since March, with some companies attributing this to a reduction in customer spending power amid uncertain domestic conditions. Export sales also decreased, marking the fastest drop in nearly a year.
On a positive note, input cost inflation eased, with the survey’s purchase prices metric showing the weakest increase in just over five years, partly due to the rand’s appreciation against the dollar.
South Africa’s currency has gained roughly 7% against the dollar year-to-date.
Despite the downturn, business sentiment remained positive, with 34% of firms expecting activity to rise over the next 12 months.