August PMI slumps to lowest since 2016, bodes ill for SA economy - Std Bank

Economic policy uncertainty and increased cost pressures on consumers saw the purchasing managers’ index for August slip to its lowest level since April 2016, according to data released by Standard Bank on Wednesday.

The PMI declined from 49.3 index points in July to 47.2 in August due to poor business conditions.

"Domestic business conditions deteriorated further in August, as the economy-wide PMI slipped to 47.2 index points from 49.3 in July. This is the lowest reading since April 2016," Standard Bank said in a statement.

"The poorly performing PMI reflects economic policy uncertainty, increased cost pressures from elevated oil prices, rand weakness, and labour strikes." 

New export orders recorded a slight decline to 47.7, from 48.8 the previous month. 

Affordability constraints

The report also revealed that companies mentioned affordability constraints among clients, political issues and nationwide strikes as factors responsible for a decline in output.

The slip in the PMI comes after the country's real gross domestic product contracted by 0.7% in the second quarter of 2018, landing the country in recession.

The recession, the country’s first since 2009, followed a revised fall of 2.6% in the first quarter of the year.

The bank said it expected the real GDP growth to rise to only 1.8% in 2019, down from the 2.0% previous estimate.

"The PMI decline was broad-based as new orders, output, employment and inventories indices fell further. This bodes ill for the SA economy in the latter half of this year," said Standard Bank.