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Standard Bank Group
The SA Daily 04 October 2018

Still weak conditions

  • The Standard Bank industry-wide PMI shows that SA business conditions deteriorated further in September, to 48.0 pts, albeit at a slower pace than August’s 47.2 pts, and slightly better than the Bloomberg consensus of 47.8 pts. All major sub-indices remained below the 50 neutral mark. Quarterly, the PMI slipped to 48.2 pts in Q3:18, reflecting broadly unfavourable business conditions, from 50.4 pts in Q2:18, due to the economy entering a technical recession in Q2.
  • There are still several downside risks to the PMI in the near- to medium term, including high oil prices, land reform uncertainty, and the global trade war’s impact. While insufficient data does not allow for a study of the statistical significance of the link between economic outcomes and the PMI, there are potential upside risks which could see business conditions improving over the medium term.
  • The recently amended Mining Charter and President Ramaphosa’s economic stimulus plan which includes plans to reduce the cost of doing business i.e. revisiting electricity, port and rail tariffs; reviving the agricultural sector, rural and township economy; and expanding procurement to small businesses, should boost economic growth over the medium term. These proactive steps should improve confidence and ease structural bottlenecks (see Business conditions still sliding of 03 October, by Thanda Sithole).

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