South African private sector activity expanded in April, albeit at a slower pace compared to the previous month as further increases in new orders were offset by climbing costs, a survey showed on Friday. The Standard Bank Purchasing Managers' Index (PMI), compiled by Markit, slipped to 50.4 in April from 51.1 in March.
The reading was the lowest since January, but still above the 50 mark separating expansion from contraction, indicating the recovery in activity following a slide to a 20-month low in December faced hurdles going into the second half of the year.
Growth in April was mainly driven by a jump in new orders, as well as upticks in employment and stock purchases. Respondents cited a number of new and planned projects for the increase in orders. Overall output was however subdued by inflationary pressures.
"The slowdown in April's PMI was largely driven by the output sub-index which fell into contraction territory as a result of the listeria outbreak, recent labour strikes and a VAT hike, from 14 percent to 15 percent," said economist at Standard Bank Thanda Sithole. The treasury in February made the unpopular decision to lift value added tax (VAT) for the first time in over two decades in a bid to plug a more than 50 billion rand ($4 billion) revenue shortfall that risked plunging the country's credit fully into sub-investment grade status.
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