Absa PMI crashes to all-time low as economic activity freezes

‘The PMI survey shows the immediate, devastating impact the lockdown had on manufacturing output and overall demand,’ Absa economist Miyelani Maluleke
Image: Moneyweb

South Africa’s seasonally-adjusted Absa Purchasing Managers’ Index (PMI) contracted to its lowest ever in April as the coronavirus lockdown, now in its sixth week, paralysed manufacturing activity.

The index, which gauges manufacturing activity in Africa’s most industrialised economy, fell to 5.1 points from 48.1 points in March, its lowest on record. A number of respondents said zero production took place during the lockdown.

The country has reported 6,336 cases of the coronavirus, with 123 deaths. The government implemented a nationwide lockdown in late March, with restrictions forcing businesses to close or operate at minimal capacity.

“The current reading is about 25 points below the lowest level recorded during the global financial crisis, which suggests that the decline in actual manufacturing output will be well in excess of the drop recorded at the time,” Absa said in the release.

South Africa’s economy was already under strain before the novel coronavirus struck, with growth in the last two quarters of 2019 shrinking by 0.8% and 1.4% respectively, mainly because of power cuts by ailing state utility Eskom.

On Monday the head of the National Treasury said gross domestic product (GDP) in 2020 could contract by as much as 12%, with manufacturing, mining and services sectors likely taking the biggest hit.

President Cyril Ramaphosa last week followed up the announcement of a R500 billion ($26.62 billion) stimulus package with a plan to ease lockdown restrictions that began on Friday.

Under the first phase of easing, only some sectors may restart operations, and with limited staff and strict social distancing rules still in place.

“The PMI survey shows the immediate, devastating impact the lockdown had on manufacturing output and overall demand,” Absa economist Miyelani Maluleke said.

“While some easing of restrictions from May should aid a slow recovery in coming months, a lot of manufacturing capacity will remain idle for some time.”

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What you get when you let The WHO and NDZ run the country.

Permanent depression here to stay. Nationalisation next step for the anc

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