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We take a look at the IHS Markit's Purchasing Managers Index (PMI) released for South Africa for the month of November 2019. What is it saying regarding stocking and purchasing activities of private sector firms?
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South African Reserve Bank
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IHS Markit's Purchasing Managers Index for November 2019
Reuters reported the latest IHS Markit's Purchasing Mangers Index (PMI) for South Africa for the month of November 2019. The article below was found on Sharenet.co.za
JOHANNESBURG, Jan 6 (Reuters) – Activity in South Africa’s private sector shrank for the eighth consecutive month in December, with the return of nationwide power cuts choking output and new orders, a survey showed on Monday. IHS Markit’s Purchasing Managers’ Index (PMI) fell to 47.6 from 48.6 in November, its lowest since October 2018 and further below the 50 level that separates expansion from contraction.
All five subindexes in the survey were in contraction territory, signalling that weak activity that saw gross domestic product contract in the third quarter would likely continue into the fourth quarter. Planned power cuts, or load shedding, by state utility Eskom returned in November as the firm’s fleet of aging stations buckled under increased demand, heavy rain and coal supply issues, forcing a swathe of big and small firms to curb operations.
In the survey, businesses said the power cuts had seriously hurt output during December, adding that generally lower sales due to subdued consumer demand and poor weather had also contributed to the decline and a slashing of inventories. “With the country’s electricity supplier Eskom implementing Stage 6 load shedding in December, many South African businesses saw activity and trade brought to a standstill,” said David Owen, an economist at IHS Markit. “The PMI reflected this disturbance, as well as severe weather conditions, falling to a 14-month low at year-end amid a sharp decline in private sector output and further falls in total new orders and export orders,” Owen added.
JOHANNESBURG, Jan 6 (Reuters) – Activity in South Africa’s private sector shrank for the eighth consecutive month in December, with the return of nationwide power cuts choking output and new orders, a survey showed on Monday. IHS Markit’s Purchasing Managers’ Index (PMI) fell to 47.6 from 48.6 in November, its lowest since October 2018 and further below the 50 level that separates expansion from contraction.
All five subindexes in the survey were in contraction territory, signalling that weak activity that saw gross domestic product contract in the third quarter would likely continue into the fourth quarter. Planned power cuts, or load shedding, by state utility Eskom returned in November as the firm’s fleet of aging stations buckled under increased demand, heavy rain and coal supply issues, forcing a swathe of big and small firms to curb operations.
In the survey, businesses said the power cuts had seriously hurt output during December, adding that generally lower sales due to subdued consumer demand and poor weather had also contributed to the decline and a slashing of inventories. “With the country’s electricity supplier Eskom implementing Stage 6 load shedding in December, many South African businesses saw activity and trade brought to a standstill,” said David Owen, an economist at IHS Markit. “The PMI reflected this disturbance, as well as severe weather conditions, falling to a 14-month low at year-end amid a sharp decline in private sector output and further falls in total new orders and export orders,” Owen added.
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The numbers are not good news for South African firms and South African in general as it shows a declining amount of activity in the private sector, which is bad news for the South African already ailing economy. Added to that the public sector (government) cannot stimulate demand in the South African economy as its struggling to pay off its ever increasing debt (thanks largely to ESKOM's ballooning debt obligations which government is providing security for). And with South Africa's 3rd quarter 2019 economic growth rate coming in at -0.6%, this sort of news does not bode well for South Africa's 4th quarter 2019 economic growth numbers.