Decline in factory activity extends decline into August – PMI

South African private sector activity contracted for the 16th straight month in August, albeit at a slower rate, as Covid-19 lockdown restrictions continued to hurt demand and sentiment, a survey showed on Thursday.

The IHS Markit Purchasing Managers’ Index (PMI) edged up to 45.3 in August from 44.9 in June, staying below the 50 mark that separates expansion from contraction.

Private sector activity has not grown in South Africa since April 2019, underscoring the weakness of the economy even before the pandemic struck in March, triggering lockdowns and leaving mines, manufacturers and retailers operating at minimal capacity.

“The imposition of stricter Covid-19 measures across South Africa in July and August, after having eased in June, mean we are increasingly seeing a long-tailed recovery in the economy according to the PMI,” economist at Markit David Owen said.

South Africa’s economy has contracted for three straight quarters, and with the return of nationwide power blackouts the outlook remains bleak. Second-quarter gross domestic product figures are due out on Tuesday.

The government and the central bank both forecast a contraction of around 7% for the year, but some analysts see a high risk of a double-digit downturn.