Business activity fell to its lowest in July

BUSINESS activity in South Africa fell to its lowest in 10 months in July, weighed down by supply disruption and demand amid civil unrest and level 4 Covid-19 restrictions.

The IHS Markit Purchasing Managers Index (PMI) fell from 51.0 points in June to 46.1 points in July, pointing to a solid deterioration in business conditions.

The decline was led by renewed declines in new orders, employment and stocks of purchases as well as a much sharper fall in output.

IHS said business activity slid at the strongest rate in 14 months during July, in the wake of the rioting across mainly KwaZulu-Natal that severely dampened sales volumes.

It said firms were also hindered by the continuation of level 4 lockdown measures and shortages of raw materials.

New orders decreased for the first time in four months, with the pace of decline the most marked since July 2020 during the first wave of the pandemic.

IHS also said July data also signalled a renewed drop in employment across the private sector economy, though the rate of job shedding was only marginal.

IHS Markit economist David Owen said the economy saw a marked impact from civil unrest in July, as the PMI fell to 46.1 to indicate a sharp contraction in private sector business conditions.

“After nine consecutive months of growth, the downturn was the first notable setback in the country’s economic recovery, as the hit to consumer confidence added to the impact of a return to level 4 lockdown,” Owen said.

However, ISH said firms were still expecting activity to improve in the coming 12 months, amid hopes that the twin effects of Covid-19 restrictions and civil unrest will soon subside. | [email protected]

BUSINESS REPORT ONLINE