Business conditions in the private sector soured dramatically during July, in the wake of tighter lockdown restrictions and civil unrest that tore through some of the country’s major economic hubs.
The economy wide IHS Markit purchasing managers’ index (PMI) fell into negative territory for the first time in 10 months during July, illustrating the extent of the disruption caused by a renewed level 4 lockdown and violence and looting that flared up in Gauteng and KwaZulu-Natal.
The index — which measures private-sector business performance — fell to 46.1 points in July from 51 in June. The survey covers roughly 400 private-sector firms and is made up of indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. A reading higher than 50 indicates an overall improvement in business conditions.
“The economy saw a marked impact from civil unrest in July,” said IHS Markit economist David Owen, in a statement.
“After nine consecutive months of growth, the downturn was the first notable setback in the country’s economic recovery, as the hit to consumer confidence added to the impact of a return to level 4 lockdown.”
Business activity slid at the fastest rate in 14 months during July, in the wake of rioting across mainly KwaZulu-Natal, which severely dampened sales volumes, according the survey. Firms were also hindered by the continuation of level 4 lockdown measures and shortages of raw materials.
“While the easing of restrictions to level 3 may help restore some confidence, there will be many businesses facing damages from the riots and a prolonged period of recovery,” said Owen. “Supply chains will also take longer to rebuild, particularly amid ongoing difficulties sourcing and supplying raw materials due to the pandemic.”
The data, released on Wednesday, echoes the slump seen in the manufacturing sector.
The Absa PMI — which covers the manufacturing sector — plummeted to a 14-month low, providing one of the first data points to reflect the hit that both the lockdown and the violence has had on economic activity.
Though manufacturing output should recover assuming no further unrest flares up, the economy’s return to pre-Covid-19 levels has most likely been delayed by at least a quarter, Hugo Pienaar, chief economist at Bureau for Economic Research, said.
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