South Africa’s manufacturing PMI edged lower in December, adding to the evidence that the economy remained weak in Q4 and raising the prospect of another technical recession.
PMI suggests weakness continued in December
- South Africa’s manufacturing PMI edged lower in December, adding to the evidence that the economy remained weak in Q4 and raising the prospect of another technical recession.
- Figures released earlier today showed that South Africa’s manufacturing PMI slipped from 47.7 in November to 47.1 in December. The survey result was better than the consensus forecast of 45.5 collected by Bloomberg. But today’s figure marked the fifth consecutive month that the measure remained below the 50 mark that – in theory at least – divides expansion from contraction.
- The decline of the headline index was mostly due to the plunge in the new orders measure, from 43.3 to 36.9, the lowest since mid-2009. Other sub-indices also weakened. The business activity measure declined to a 32-month low, which may be partially the result of significant power cuts. Respondents became even more pessimistic about the prospects for this year, the sub-index measuring expectations for business conditions in six months’ time fell to 45.9. (See Table 1.)
- The relationship between the manufacturing PMI and actual output is, in any event, relatively weak. But the recent string of very downbeat readings suggests to us that the measure is reflecting underlying weakness in the sector. When the survey underestimates output, it tends to give one or two very bearish figure before rebounding, as in late 2018. (See Chart 1.)
- December’s survey adds to the evidence that the economy remained weak in Q4. Available activity figures suggest that Q3’s contraction continued into October. And electricity production in November fell again. With the latest PMI survey, there’s no sign of a turnaround at the end of 2019. Another technical recession looks increasingly likely.
Chart 1: South Africa PMI & Manufacturing Production
Source: Stats SA, Capital Economics
Table 1: South Africa Manufacturing PMI
Sources: Stats SA
Virág Fórizs, Emerging Markets Economist, +44 20 7808 4079, email@example.com