The rise in South Africa’s manufacturing PMI in February suggests that the economy bounced back from around the turn of the year, and the recent easing of lockdown measures should support activity this month. But slow vaccine roll-out, power cuts and austerity will likely prevent a rapid recovery in industry.
South Africa’s economic pain easing
- The rise in South Africa’s manufacturing PMI in February suggests that the economy bounced back from around the turn of the year, and the recent easing of lockdown measures should support activity this month. But slow vaccine roll-out, power cuts and austerity will likely prevent a rapid recovery in industry.
- Figures released this morning showed that South Africa’s manufacturing PMI rose for a third consecutive month, to 53.0 in February from 50.9 in January. The headline reading came in above the Bloomberg consensus estimate of 50.8.
- The breakdown of the headline index points to a broad-based improvement in business conditions. The new orders and business activity components picked up, to 54.0 and 52.1 respectively, surpassing the 50-mark which, in theory at least, separates expansion from contraction. (See Table 1.) Supply chain disruptions, reflected in the supplier deliveries component, appear to have eased.
- While the relationship between the business activity component of the PMI and the hard manufacturing data is far from perfect, the latest reading is consistent on past form with manufacturing output expanding by 8-9% 3m/3m in February, up from a small contraction of 1-2% 3m/3m in January. (See Chart 1.)
- The relaxation of containment measures at the start of February on the back of sharply declining COVID-19 cases probably supported activity. While the authorities maintained the country’s lockdown level (at three, out of five), some restrictions were eased including a partial lifting of an alcohol ban and shortening of a curfew. And the country’s delayed vaccination campaign finally got underway.
- Further easing of restrictions, announced on Sunday, will give a boost to activity in the final month of Q1. From the start of March, South Africa’s lockdown level changed to one with even fewer curbs on the economic activity. Progress on the roll-out of vaccines is likely to support activity as well. That said, widespread vaccination is still several months away, and the recovery will also be held back by persistent power cuts and the government’s austerity plans.
Chart 1: South Africa PMI & Manufacturing Production
Sources: ABSA/BER, Stats SA, Capital Economics
Table 1: South Africa Manufacturing PMI
Sources: ABSA/BER, Capital Economics
Virág Fórizs, Africa Economist, email@example.com