South Africa’s Absa PMI falls further in January

South Africa’s seasonally adjusted Absa Purchasing Managers’ Index (PMI) slipped deeper into contraction territory in January as employment and inventories fell despite a recovery in new sales orders, a survey showed on Monday.

Growth in Africa’s most developed economy has been meek for the last decade and is set to remain so as nationwide power cuts by state firm Eskom hit business activity and consumer confidence.

The central bank expects economic growth of 1.2% in 2020, higher than the International Monetary Fund’s forecast last week of 0.8%. The country needs growth of at least 3% to tackle soaring unemployment and poverty and lure back investors.

The index, which gauges manufacturing activity in Africa’s most industrialised economy, fell to 45.2 points in January from 47.1 in December, remaining below the 50-point mark separating contraction from expansion for a sixth straight month.

The survey showed demand remained slack, with only two of the five major subcomponents recovering, albeit from multi-year lows. Three measures declined, and overall only one subcomponent was in expansion.

“This suggests that sustained weak demand is weighing on activity growth,” said Absa economist Miyelani Maluleke.

“Worryingly, even as current conditions deteriorated further, respondents still turned more pessimistic about the business environment going forward,” Maluleke added.