March 2, 2020 / 9:56 AM / 3 months ago

UPDATE 1-South Africa's Absa PMI falls to lowest in over a decade

(Adds details, background, quote)

JOHANNESBURG, March 2 (Reuters) - South Africa’s seasonally-adjusted Absa Purchasing Managers’ Index (PMI) fell deeper into contraction territory in February, sliding to its lowest since the 2009 global financial crisis as new sales and business activity tanked, the survey showed on Monday.

The index, which gauges manufacturing activity in Africa’s most industrialised economy, fell to 44.3 points in February from 45.2 in January, remaining below the 50-point mark separating contraction from expansion for a seventh straight month.

Africa’s most advanced economy has seen growth flounder in recent months due to nationwide power cuts and a steady decline in business and consumer confidence, and is unlikely to see the economy expand by much in 2020.

Four of the five subcomponents of the index declined, with inventories and new sales taking the hardest hit, as businesses slowed activity at a greater pace due to slack local and global economic prospects, more so as the impact of the coronavirus outbreak deepened.

“Eskom’s announcement of a high likelihood of load shedding during the next 18 months likely contributed to the further deterioration in sentiment regarding business conditions going forward,” analysts at Absa said in the release.

Treasury has cut the 2020 growth forecast to 0.9%, raising the likelihood of the South Africa losing its final investment grade credit rating from Moody’s, which could see sentiment and activity suffer even further. (Reporting by Mfuneko Toyana; editing by Olivia Kumwenda-Mtambo)

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