PMI shows slight uptick in private sector prospects

Cape Town - The Standard Bank South Africa purchasing managers' index (PMI) rose from 49.0 in June to 50.1 in July, Standard Bank said in a statement on Thursday.

This signalled broadly no change in overall private sector operating conditions at the start of the second half of 2017. The latest figure is the second-lowest in the past 11 months and below the six-year long-run survey average of 50.7.

The PMI rise in July reflected renewed growth in new business, employment and stocks of purchases and a slower fall in output. Private sector business activity in South Africa declined for the fourth successive month in July. The rate of contraction slowed since June, but was still the second-fastest registered since April 2016.

Output declined despite a renewed rise in new work. New business grew at the fastest rate since March, although this was modest overall. A further decline in new export sales weighed on growth of total new orders.

Private sector employment also rose in July, following the first decline in a year in June. Though marginal overall, job creation helped firms to cut the level of outstanding business for the second consecutive month.

Purchasing operations were stepped up in July as the volume of incoming new business grew. Input buying in the private sector rose for the first time in three months, although this was at a weak rate. Subsequently, stocks of purchases also expanded slightly and for the first time since April. Suppliers’ delivery times lengthened, but only slightly.

Inflationary pressures in the South African private sector remained relatively weak in July. This mainly reflected a survey-record low rate of wage inflation during the month. Purchase prices increased at the strongest rate in six months, albeit one that remained weaker than the six-year long-run survey average.

Commenting on July’s survey findings, Standard Bank economist Thanda Sithole said: “At 50.1 as well as 50.3 average recorded between January-July this year, the PMI is marginally above the 49.7 average recorded in 2016.

"This means that private sector prospects are slightly better now than last year and could even improve more meaningfully should domestic policy execution become positive and entrenched.

“Indices tracking new orders, employment and stocks of purchases climbed above 50 while that tracking output improved but remained in contractionary terrain.”


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