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August 2011 | Adam Leach
Economic activity in South Africa declined steeply last month, falling to a two-year
Kagiso Purchasing Managers’ Index (PMI) for July reported a drop of 9.7 points to
44.2, compared with June, hitting its lowest point since July 2009. While growth
has slowed over the past three months, this is the first time the PMI has
dropped below the critical 50 mark, which indicates contraction.
to SM about the report, André Coetzee, managing director
of CIPS Southern Africa said: “It was quite a shock to the market, because they were under the
consensus that the number they were going to be looking at was around 52, but
this is a disastrous move.”
believes the sharp drop was the result of a “lethal cocktail” of three factors.
“First, the strike action we saw in July; second, global and local demand
tapering off; and third, a lack of competitiveness. And the one thing we can
say about that is the persistently strong rand.”
he doesn't believe this latest PMI will be a momentary blip: “If you look at
those three factors, I don't think they're going to go away soon.”
report also found that the rate of new business orders dropped by 9.2 points,
inventories by 10 points and employment dropped from 47.7 to 39.1. Purchasers
looking for a shred of good news can grasp onto the fact that input costs eased
marginally to 75.
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