Load shedding hits October business activity - index

Business activity remained in the doldrums during October and most respondents to the IHS Markit's Purchasing Manager's Index expect business conditions to improve in the near future.

The PMI – which measures business performance in the private sector – ticked slightly higher at 49.4 points for October. The September reading was 49.2 points.  The readings are still below the 50-neutral mark and reflect a deterioration in business conditions. Figures above 50 reflect an improvement in the sector, according to the report.

IHS Markit noted that the latest decline was only "marginal". The weaker business activity is attributed to lower levels of sales. "Where lower sales were reported, this was often related to poor economic conditions and a loss of competitiveness to foreign companies," the report read.

According to the report new export orders fell "at the fastest rate since June". Businesses in turn reduced output levels for the sixth consecutive month, but the rate of decline was slower than during the third quarter. "Respondents mainly linked this to a fall in sales, although some mentioned that additional load shedding and the unavailability of some raw materials curtailed output.

"Load shedding also returned during the month, impacting slightly upon sales. There were also mentions of stock shortages hindering firms' activity. Altogether, there are still a number of risks in the South African economy, and a long way to go to counteract them," David Owen, economist at IHS market said.

Shortages of inputs also disrupted supply chain, companies reported a lengthening of delivery times for the ninth consecutive month. "The rate of deterioration was the quickest since June," the report read.

Companies however kept input buying unchanged and raised job numbers at the fastest rate in one-and-a-half years as there was a greater need to hire additional labour in October, according to the report.

New business received by private sector firms fell again in October – for the 16th consecutive month. "The decrease was moderate and quicker than in September," the report noted.

"Cost pressures were again subdued, with input prices rising at a modest, but quicker, pace. Companies notably increased salaries as a result of elevated hiring activity, following a slight reduction during September," the report read.

Owen said sentiment towards future activity improved slightly. "Yet there were still several firms that emphasised the continuing impact of wider economic conditions on business output," Owen said.

Compiled by Lameez Omarjee

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