South African private sector activity shrank at the fastest rate in over four years in October as sharp declines in output, new orders and export demand saw firms cut back purchasing amid a recession, a survey showed on Monday.
The Standard Bank Purchasing Managers’ Index (PMI), compiled by IHS Markit, fell to 46.9 in October from 48.0 in September, its lowest reading since July 2014, with the survey data showing businesses were hit by weak demand across the sector.
Participants in the survey cited the economic downturn as a key factor, while new export orders were impacted by the volatile currency. Firms also raised prices at the fastest rate in over two years, the survey found.
Africa’s most industrialised economy fell into recession in the second quarter, while the weak outlook for the rest of 2018 was underlined by a bleak midterm budget and a warning last week by S&P Global Ratings about worsening fiscal conditions.
The PMI recorded its fourth consecutive month below the 50 mark that separates expansion from contraction.
IHS Markit’s economist David Owen said the steep reduction in purchasing activity raised the risk of a contraction in gross domestic product in the second half of 2018. He said the slight increase in confidence was negligible compared with previous years.
President Cyril Ramaphosa’s turnaround plan to reprioritise 50 billion rand in expenditure to high impact projects and lure $100 billion in foreign investment has so far received mixed reactions from investors, and is yet to make a solid impact on consumer and business confidence.