The point-six improvement that South Africa’s manufacturing purchasing managers’ index (PMI) has recorded from December to January should be seen as cold comfort against the bleak wider background, London research consultancy Capital Economics (CE) is reporting.
In a statement released this morning, CE says the rise in manufacturing PMI appears to hide underlying weakness in activity on the back of virus-related restrictions.
“Even with some signs of a break in the clouds over South Africa’s economy, we expect the recovery to remain sluggish.”
This is despite figures released this morning showing that the country’s month-on-month manufacturing PMI has improved from 50.3 to 50.9.
“The headline reading came in above the Bloomberg consensus of 50.0,” CE says.
“The increase in the headline rate masks underlying weakness in the economy,” it adds. “While the new orders and employment components rose to 47.2 and 48.6 respectively, both remained below the 50 mark which, in theory at least, separates expansion from contraction.
“What’s more, the business activity component – which historically has a better relationship with the hard activity data than the headline PMI figure – dropped further.
“The fall in the business activity component, from 44.9 in December to 43.5 in January, is consistent with manufacturing output contracting by 1-2% in January.”
