Key economic index bounces higher – but the economy is still in trouble

South Africa’s seasonally adjusted Absa Purchasing Managers’ Index (PMI) expanded in May with factories gradually restarting activity as the coronavirus lockdown eased, helping to lift production and sales.

The index, which gauges manufacturing activity in the economy, rose to 50.2 points in May from 46.1 points in April.

On Monday, South Africa further eased the lockdown that has been in place since late March, allowing more people out for work, worship or shopping, and allowing mines and factories to run at full capacity.

The economy was already in recession when the pandemic struck. It’s now expected by the central bank to shrink 7% this year, but economists expect an even deeper recession as well as deep job losses.

The PMI report showed the business activity sub-index rose to 43.2 points in May from an all-time low of 5.1 index points in April. The new sales sub-component also rose but remained below the 50-point mark dividing contraction from expansion, while the employment index was largely flat at 26.8.

“The sharp rise in the business activity index in May is relative to virtually nothing in April and still suggests very subdued overall activity levels,” economists at Absa said.

“Worryingly, some respondents indicated that whereas the lockdown regulations in May would have allowed for a further ramp-up of production, there was not sufficient demand to warrant this.”  — Reported by Mfuneko Toyana, (c) Reuters