South Africa's sharp economic downturn extends into July: PMI

Andrew Cummings
August 5, 2020

Survey respondents linked falls in both activity and order books to the adverse impact stemming from the COVID-19 pandemic, with frequent mentions of lockdown measures, weak demand conditions and the temporary suspension of company operations.

The final Jibun Bank Japan Services Purchasing Managers' Index (PMI) edged up to a seasonally adjusted 45.4 in July, hardly an encouraging change from 45.0 in June and a preliminary 45.2 reading.

On Monday, China's Caixin Markit survey report for factory activities had revealed that the Asian business activities had been recovering from the pandemic-induced slump much-faster than anticipated as a cataclysmic outlook in Asia's factory activity continues to brighten up in July with shrinkage slowing down in a number of export-reliant Asian economies, suggesting that the region's manufacturing activity has been steadily bouncing back following the apocalyptic hit of the pandemic outbreak. Moreover, the latest reading was among the lowest recorded in almost 15 years of data collection, said the survey report.

"Subsequently, firms made further cuts to staff numbers, with the rate of job shedding the most marked on record". The latest decline in new export orders was steeper than that for total new business, but the least severe since March, the survey pointed out. The indices vary between 0 and 100, with a reading of above 50 indicating an overall increase, compared to the previous month, and below 50 an overall decrease.

As a result, services firms remained pessimistic with regards to activity over the year ahead for a third consecutive month in July, said the PMI survey report.

He added: "With such a prolonged and significant downturn, any substantial recovery will take many months, if not years". July data, as a whole, provide no real signs that the downturn is slowing down. "Latest IHS Markit estimates point to an annual contraction in GDP of over 6 per cent in the year ending March 2021", he said.

That has forced state and central governments to impose strict lockdown measures to curb the spread of the virus, keeping people at home and businesses closed, stifling demand and cementing fears of a deep recession. "As lockdown restrictions are loosened, we expect more firms to move towards a recovery", he said.

IHS Markit's overall composite PMI index, covering the services and manufacturing sectors, rose to 57.3 - again below an initial forecast of 57.6 - from 51.7 in June.

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