S. Africa business activity shrinks in June – PMI

South Africa’s private sector experienced a contraction in activity during June, according to a survey released on Wednesday by S&P Global.

The S&P Global South Africa Purchasing Managers’ Index (PMI) fell to 49.2 in June, down from 50.4 in May. A reading below 50 indicates a decline in business activity.

This slowdown in growth is attributed in part to lingering uncertainty following the national election held on May 29th.

The African National Congress (ANC) lost its parliamentary majority for the first time since the end of apartheid, creating a sense of unease in financial markets.

The ANC’s subsequent decision to form a coalition government with ten other political parties further prolonged the wait for clarity.

Markets spent much of June anticipating the composition of President Cyril Ramaphosa’s cabinet, which could potentially impact business sentiment.

David Owen, a senior economist at S&P Global Market Intelligence, attributed the sharp decline in the PMI to steep drops in output and new orders.

Output fell at the fastest rate in three months, while new orders have been declining for fourteen consecutive months.

Despite the contraction, Owen anticipates a possible recovery in sales for July. As businesses return to their usual operations, a slight uptick in activity could be observed.

Attribution: Reuters