Business activity shrinks solidly in January

Activity in private sector in January contracted at its fastest pace since the end of 2021 as new orders fell due to rolling power cuts and weak economic conditions, a survey showed on Friday.

S&P Global’s South Africa purchasing managers’ index (PMI) contracted to 48.7 in January from 50.2 in December. Readings below 50 indicate a contraction in activity.

“The South African economy suffered a fresh downturn at the beginning of 2023, driven by a stronger decline in new business inflows that was the most marked in just over a year,” David Owen, economist at S&P Global Market Intelligence, said.

Another round of power outages caused further disruption to supply chains and curtailed business activity, S&P said.

Struggling state utility Eskom has implemented power cuts every day this year, after a record number of days with outages in 2022.

Despite that, firms remained broadly optimistic regarding the 12-month outlook, with over half of all respondents expecting activity to grow, S&P added.