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South Africa Private Sector Downturn Slows In June

South Africa’s private sector contracted at a softer pace in June as the government relaxed the lockdown restrictions imposed to slow the spread of the coronavirus, or Covid-19, pandemic, survey data from IHS Markit showed on Friday.

The headline Purchasing Managers’ Index rose to a three-month high of 42.5 in June from a record low 32.5 in May. Any reading below 50 indicates contraction in the sector.

Output and new business declined further in June, with the rate of fall weaker than the previous month. Demand decreased at the slowest rate since March.

New export orders declined at a softer pace in June and new business fell by historical standard.

Employment continued to decline in June, and input purchases and stock levels curbed as firms eased cost pressure.

Firms are confident about the growth in the next 12-months in June and was optimistic despite easing lockdown measures.

Suppliers’ delivery time lengthened for the seventeenth straight month in June and lower staffs led to decline in supplier performance.

Input cost fell for the second month in a row in June and purchasing prices were reduced at a softer pace. Output charges eased sharply for the second consecutive month.

“This relaxation of COVID-19-related measures came despite the continued rise in case numbers, as President Ramaphosa reportedly opted to preserve economic livelihoods and boost the ailing South African economy,” David Owen, Economist at IHS Markit, said.

“However, demand levels still remain weak, and the growing surge of COVID-19 cases will likely worry consumers going forward,” Owen added.

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