The outlook for South Africa's business activity remained strong in November after private sector sentiment recovered to growth territory not seen since May.
This has signalled a modest recovery in business conditions after a two-week strike by the biggest metal workers union disrupted activity in October.
The IHS Markit Purchasing Managers Index (PMI) released on Friday rose to a six-month high in November, driven by output, new orders and employment.
The PMI jumped to 51.7 index points from contractionary levels of 48.6 index points as the metal workers’ strike cost the economy R600 million and R300m in salary losses.
IHS Markit said the latest data indicated only a slight uplift in business activity midway through the final quarter, following a sharp downturn in the prior month due to the strike.
All indices recovered to some degree in November, although firms continued to see widespread delays to input supply.
New orders were also up only marginally, whereas export sales fell for the sixth month in a row.
IHS Markit said surveyed companies pointed to an improvement in client demand, but one that was often overshadowed by supply-side problems on disruptions of global supply chains.
It said around 43 percent of panellists gave a positive forecast for output, compared to just 4 percent that expected a decline, but that was before the Omicron variant turned things around.
It said a lack of raw material supply and vendor delays meant that many firms were unable to increase their output, and some clients delayed their orders.
IHS Markit companies reduced their purchasing and stock levels as delivery times lengthened, although the latest decrease in inventories was the softest seen in five months.
IHS economist David Owen said the economy made a step in the right direction in November, albeit a modest one, with the PMI indices pointing to a slight rebound.
However, Owen said while businesses enjoyed a strengthening of customer demand, supply shortages and inflationary pressures remained key headwinds.
He said the latest increase in input costs was among the fastest since mid-2016, which firms passed on to consumers through a sharper uptick in output charges.
“In addition, the country now faces fresh challenges from the Omicron variant, which has led to renewed travel barriers and economic uncertainty, and shows that the recovery from the pandemic is still not as smooth as businesses would prefer,” Owen said.
“Renewed Covid-19 measures, or even a loss of consumer confidence, could tip the PMI straight back into sub-50 territory in December.”
Meanwhile, IHS Markit said job numbers increased for the first time since August, in line with a slight rebound in sales and higher workloads.
It said that in November firms continued to predict a recovery from the pandemic and an easing of supply chain issues.
The IHS Markit’s reading was in line with the Absa PMI for the manufacturing industry, which climbed to 57.2 index points in November, up from 53.6 points in October and 54.7 in September.
BUSINESS REPORT ONLINE