BUSINESS conditions in the private sector improved to a six-month high last month as new orders and employment levels stabilised while output declined at a slower pace.
The Markit/Standard Bank SA purchasing managers index (PMI) rose from 47.5 in October to 49.6 last month. About 400 private-sector executives at companies across various sectors were surveyed on current business conditions including new orders, employment and input prices.
"While this is an encouraging sign of a pickup in domestic demand specifically, we note that output has been in contraction for seven consecutive months," Standard Bank economist Kuvasha Naidoo said.
Although a reading below 50 shows deterioration in private-sector business conditions, the slight improvement indicated a slower pace of deterioration.
The main driver of the improvement in the PMI was a stabilisation in new business following a five-month period of contraction.
"Some companies commented on successful contract wins," the bank said.
Employment also stabilised with only marginal job cuts being reported.
Companies remain cautious, with pre-production inventories and purchasing activity falling further. The rates of decline, however, eased in each case.
Input costs continued to rise due to higher wages and purchase prices. Companies were forced to marginally raise selling prices.
"Higher input prices in general are expected to squeeze manufacturers’ margins. Notably, firms continued to pass on higher costs … as reflected by the rise in output price inflation to a six-month high," Ms Naidoo said.
New export orders remained in contraction, indicating sluggish global demand. The last time new export orders grew was in December last year, according to the bank.
The Markit/Standard Bank SA purchasing managers index (PMI) rose from 47.5 in October to 49.6 last month. About 400 private-sector executives at companies across various sectors were surveyed on current business conditions including new orders, employment and input prices.
"While this is an encouraging sign of a pickup in domestic demand specifically, we note that output has been in contraction for seven consecutive months," Standard Bank economist Kuvasha Naidoo said.
Although a reading below 50 shows deterioration in private-sector business conditions, the slight improvement indicated a slower pace of deterioration.
The main driver of the improvement in the PMI was a stabilisation in new business following a five-month period of contraction.
"Some companies commented on successful contract wins," the bank said.
Employment also stabilised with only marginal job cuts being reported.
Companies remain cautious, with pre-production inventories and purchasing activity falling further. The rates of decline, however, eased in each case.
Input costs continued to rise due to higher wages and purchase prices. Companies were forced to marginally raise selling prices.
"Higher input prices in general are expected to squeeze manufacturers’ margins. Notably, firms continued to pass on higher costs … as reflected by the rise in output price inflation to a six-month high," Ms Naidoo said.
New export orders remained in contraction, indicating sluggish global demand. The last time new export orders grew was in December last year, according to the bank.
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