SA private sector shrinks for 8th straight month in December – PMI

Activity in South Africa’s private sector shrank for the eighth consecutive month in December, with the return of nationwide power cuts choking output and new orders, a survey showed on Monday.

IHS Markit’s Purchasing Managers’ Index (PMI) fell to 47.6 from 48.6 in November, its lowest since October 2018 and further below the 50 level that separates expansion from contraction.

All five subindexes in the survey were in contraction territory, signalling that weak activity that saw gross domestic product contract in the third quarter would likely continue into the fourth quarter.

Planned power cuts, or load shedding, by state utility Eskom returned in November as the firm’s fleet of aging stations buckled under increased demand, heavy rain and coal supply issues, forcing a swathe of big and small firms to curb operations.

In the survey, businesses said the power cuts had seriously hurt output during December, adding that generally lower sales due to subdued consumer demand and poor weather had also contributed to the decline and a slashing of inventories.

“With the country’s electricity supplier Eskom implementing Stage 6 load shedding in December, many South African businesses saw activity and trade brought to a standstill,” said David Owen, an economist at IHS Markit.

“The PMI reflected this disturbance, as well as severe weather conditions, falling to a 14-month low at year-end amid a sharp decline in private sector output and further falls in total new orders and export orders,” Owen added.