COVID-19 Lockdown Pushes South Africa's PMI into Record Low

A survey has shown that South African private sector activity fell to a new record low in April, as seen on Wednesday. This is due to a nationwide coronavirus lockdown and closure of companies.

 

Source : Bloomberg, South African Manufacturing Plant

Markit’s Purchasing Managers’ Index (PMI) dipped to 35.1 in April from 44.5 in March. This is its lowest level since the survey began in 2011. The figure was below the 50 level that separates expansion from contraction for the 12th month in a row.

Africa’s most developed economy is now in its sixth week of a strict lockdown aimed at curbing the spread of COVID-19, the respiratory disease caused by the novel virus, which has infected over 6,000 South Africans and killed 123.

Although, the lockdown has been partially eased since Friday, allowing some sectors to operate under specific conditions, the economy, which is already in recession, is still expected to take a massive hit.

The National Treasury had on Monday reported that gross domestic product could contract by as much as 12% in 2020, with manufacturing, mining and services likely to be the worst affected sectors.

“The plunge in the South Africa PMI was testament to the impact that the nationwide lockdown has had on the economy,” said David Owen, an economist at IHS Markit.

“With the lockdown in place, many firms simply shut down operations, rather than partially reducing output,” Owen added.

“As such, the magnitude of the collapse in economic activity could be even more cataclysmic than the index suggests, with jobs and revenues set to suffer greatly as well.”

Output declined at its sharpest rate on record, while new orders also fell due to export and supply chain restrictions. The survey also found that firms had drastically cut their workforces, raising the risk unemployment will top the 40% mark.