South Africa’s private sector contracts again in September – PMI

South African private sector activity remained in contraction for a fifth consecutive month in September as new orders and output fell while sentiment was subdued, a survey showed on Thursday.

IHS Markit’s Purchasing Managers’ Index (PMI) fell to 49.2 in September from 49.7 in August, remaining below the 50 point mark that separates expansion from contraction.

Firms saw an extension of the decline in new orders during September, recording a 15th successive monthly fall in total demand.

“With some businesses hampered by unrest over the course of September, the headline PMI signalled a further deterioration in the health of the private sector economy,” said David Owen, an economist at IHS Markit.

Consecutive days of riots and looting in September in parts of Johannesburg and Pretoria, targeting mainly foreign nationals and their businesses, led to 15 deaths and over 400 arrests.

The violence added to overall uncertainty and unease over economic growth, which is set to expand by less than 1% in 2019, raising the risk of further credit rating downgrades and more difficult conditions for businesses and consumers.

“The latest survey results meant that the average PMI reading for the third quarter posted at 49.1, the lowest for the year so far, and suggested that third quarter GDP growth will be modest at best,” Owen said.

The treasury is due to present its medium term budget in parliament on October 30, with Finance Minister Tito Mboweni’s speech keenly watched for details about the restructuring of state power firm Eskom and a plan to stimulate growth.

Detailed PMI data are only available under licence from IHS Markit and customers need to apply for a licence.