Private sector economic activity slumped during July, highlighting the debilitating impact of the four-week metals and engineering strike, the hangover from the five-month platinum strike and the indirect effects of labour unrest on other sectors of the economy, HSBC economist David Faulkner said on Tuesday.
Operating conditions deteriorated for the fourth consecutive month in July with the HSBC headline seasonally adjusted purchasing managers’ index (PMI) having dropped from 49.5 in June to 46.4 – its lowest level since the inception of the PMI in July 2011.
“Demand indicators – output, new orders and new export orders – contracted at their fastest pace on record with at least 30% of surveyed companies identifying lower volumes in July.
“In an environment of falling demand, it is hardly surprising that employment contracted in July, which could place additional pressure on South Africa's current unemployment rate of 25.5%,” Faulkner commented.
HSBC noted that the rate of job shedding during July was the sharpest since data collection began in July 2011.
Meanwhile, backlogs of work were depleted for a fifth successive month, albeit in July at the slowest pace in that sequence, with companies commenting on lower order intakes, while input prices continued to increase during the month, but the rate of cost inflation eased to the weakest in one-and-a-half years.
Faulkner said the moderation in the pace of input and output price inflation suggested that price pressures in the economy, while elevated, were likely to ease slightly in the near term, in line with the deceleration of producer price index inflation over the past two months and consumer price index inflation stabilising at 6.6% in June.
Meanwhile, stocks of purchases held at South African private sector companies fell for a second month running in July and at the quickest pace in the series' history, HSBC added.