South Africa’s manufacturing PMI dropped further in January, adding to the evidence that the economy remained very weak at the start of 2020.
PMI suggests weakness continued in the New Year
- South Africa’s manufacturing PMI dropped further in January, adding to the evidence that the economy remained very weak at the start of 2020.
- Figures released earlier today showed that South Africa’s manufacturing PMI fell from 47.1 in December to 45.2 in January. The survey result was below the consensus forecast of 47.3 collected by Bloomberg, and even worse than the most pessimistic estimate. Today’s figure marked the sixth consecutive month that the measure remained below the 50 mark that – in theory at least – divides expansion from contraction.
- The decline in the headline index was mostly due to a surprise plunge in the employment measure, from 43.0 to 37.8, the lowest since mid-2014. Respondents became even more pessimistic about the prospects for 2020; the sub-index measuring expectations for business conditions in six months’ time fell to 42.5. On a positive note, other sub-indices bounced back from very weak readings in December. (See Table 1.)
- The relationship between the manufacturing PMI and actual output is relatively weak. But the recent string of very downbeat readings suggests to us that the measure is reflecting underlying weakness in the sector. (See Chart 1.)
- January’s survey data dash hopes for a strong start to the new year. We think that, despite a stronger November, the economy probably shrunk again in Q4, entering a technical recession. The latest PMI figures raise the prospect of another contraction in GDP in Q1.
Chart 1: South Africa PMI & Manufacturing Production
Sources: Stats SA, Capital Economics
Table 1: South Africa Manufacturing PMI
Sources: Stats SA
Virág Fórizs, Emerging Markets Economist, +44 20 7808 4079, firstname.lastname@example.org