Economic downturn signs emerge as South Africa's PMI drops to 50.1

SOUTH Africa's private sector economy has signalled a concerning shift towards fragility, as evidenced by the latest S&P Global Purchasing Managers' Index (PMI).

- SIPHELELE DLUDLA

The PMI, which serves as a composite indicator of operating conditions in the private sector, revealed a notable decline on Thursday, dropping from 50.8 in May to 50.1 in June.

This reading, while remaining barely within the expansion territory, raises red flags as business confidence plummeted to its lowest point in nearly four years.

The PMI serves as a crucial economic barometer; readings above 50 indicate an improvement in business conditions compared to the prior month, while readings below this threshold reflect deterioration.

This S&P economic indicator corresponds with the Absa PMI released on Tuesday, which showed that the economy remained in contractionary territory for the eighth consecutive month, despite the index rising by 5.4 points to reach 48.5 in June from 43.1 in May.

With the June figure hovering just above the critical 50.0 mark in the S&P PMI, early signs of a potential economic downturn are evident.

The PMI's underlying components painted a mixed picture: a decline in output and new business volumes contrasted with increases in stock levels and workforce size.