Private sector sees slight improvement in business conditions

Research entity’s report signals a modest private sector growth in the period since lockdown eased.

The IHS Markit’s Purchasing Managers’ Index (PMI), released on 4 November, reported a rise to 51 index points in October from 49.4 points in September.

Private sector activity in South Africa rose to a 31-month high in October as an easing of restrictions boosted output and new orders.

For the first time since April 2019, the IHS PMI moved back above the 50-point level that separates expansion from contraction. This showed a modest improvement in business conditions across the private sector as the PMI has now risen in five successive months following its low point in May.

This was also in line with the Absa PMI, which rose to 60.9 index points in October from a revised 58.5 index points in September, as further easing of restrictions helped to support an ongoing recovery.

in September South Africa moved to level 1 of lockdown restrictions to allow for more activity as the rate of Covid-19 infections slowed down. IHS said output, new orders and purchasing activity all expanded during the month, while employment fell at the slowest pace since before the Covid-19 outbreak.

Business activity increased for the first time in a year-and-a-half, and to the greatest extent since December 2016. New business also expanded for the first time in 28 months as customer demand improved following the easing of Covid-19 restrictions. 

Economics director at IHS Markit Andrew Harker said that employment also appeared to be on track to return to growth in the coming months. Harker said that gross domestic product could grow again during the final three months of 2020, following an anticipated “mechanical” rebound in the third quarter.

“That said, caution is provided by the situation in other parts of the world where a second wave of the virus has occurred. South Africa will therefore need to keep Covid-19 suppressed if the current recovery is to be sustained,” Andrew said.