JOHANNESBURG – Private sector activity in South Africa contracted for the first time in nine months in April as new export orders continued to decline and growth remained marginal in Africa’s most industrialised economy.
The Standard Bank Purchasing Managers’ Index (PMI), compiled by Markit, edged lower to 50.3 from 50.7 in March.
It remained above the 50 mark dividing expansion from contraction for the eighth month in a row even though a majority of the PMI’s sub-indexes showed a decline. “The output index fell to 49.6 after remaining above 50
since September 2016, primarily due to slow sales, economic and political uncertainty,” said Standard Bank economist Thandie Sithole. “New export orders remained in contractionary territory signalling uncertainty and weak confidence.”
South Africa’s economic outlook has been further clouded by credit rating downgrades to “junk” by two of the three major rating agencies following President Jacob Zuma’s decision in late March to fire finance minister Pravin Gordhan.
A fall below investment-grade typically constricts funding and sharply raises borrowing costs. South Africa’s central bank warned on Tuesday that further downgrades would have a significant impact on the cost of
funding and investment flows, restraining already dismal growth prospects.
The Reserve Bank has previously said it is likely to lower its modest estimate of 1.2 percent GDP growth in 2017 due the negative impact of the downgrades.
