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Black Friday sales fail to stem private sector decline

Dec 05 2017 13:11

Cape Town - The latest purchasing managers' Index (PMI) survey from Standard Bank and IHS Markit signalled a further deterioration in business conditions in the South African private sector in November.

Lower underlying demand formed the basis for the decline as new orders fell at the quickest pace observed since early 2016.

This led output to fall at a faster rate than was noted in the previous month. A lack of pressure on capacity caused firms to contract their workforce numbers and purchasing activity. Meanwhile, inflationary pressures continued to rise as cost burdens increased at a faster rate.

The rate at which private sector business conditions deteriorated accelerated in November, as signalled by the PMI registering at 48.8 in November, down from 49.6 in October. Any figure greater than 50.0 indicates overall improvement in conditions.

This marked the fourth consecutive month of declining business conditions, while business activity fell at private sector firms for the eighth successive month in November.

The downturn was bolstered by a lack of new orders, which fell for the fourth month in a row and at the fastest pace observed in 20 months.

Companies reacted by contracting their payroll numbers in November, after having expanded their employment slightly in October. Furthermore, purchasing activity declined at the fastest pace observed since March 2016. This led stocks of purchases to fall further during the month.

Lower customer demand eased capacity pressures, helping companies to work through their outstanding business. This lengthened the current sequence of contraction to six months. On the other hand, lead times on inputs lengthened further in November, and to the greatest extent observed in over three years. This was linked partially to delays at ports.

Inflationary pressures were evident in November as businesses operating in the private sector continued to increase the average price charged for their products and services. Firms linked the rise partly to higher transportation costs.

Input prices also rose, influenced by higher staff and purchase costs. Moreover, the rate of inflation quickened from October to the highest in ten months. The PMI signals further deterioration in South African private sector.

Kim Silberman, Economist at Standard Bank, said: “According to the PMI data, Black Friday sales did not manage to compensate for factors weighing against domestic demand, as output contracted faster in November than in October, and employment fell. Economic activity contracted for the eighth consecutive month.

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standard bank  |  pmi  |  sa economy


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