SSA PMI’s rose in June despite COVID-19 shocks, here’s why

Sub-Saharan African Purchasing Managers Index (PMI) released by Markit Economics showed a rise in June, signaling a slight improvement in business conditions in the six countries that were surveyed. Despite the overall economic downturn caused by the COVID-19 pandemic, the increase in PMIs can be attributed to the gradual reopening of economies following lockdown measures in the previous months. Ridle Markus, an Africa strategist at Absa Corporate and Investment Banking, shed light on the current economic trends in Africa and provided insights into what to expect in the African markets in the coming week. The rise in PMIs, although positive, does not indicate a fully recovered economy. Most countries still remain in negative territory, signifying a contraction in business conditions. Countries like Ghana are inching close to stability with a PMI of 49.7, but the road to positive growth will be a gradual process. Markus emphasized that it may take until deeper into the third quarter for these economies to show significant improvement as they continue to navigate the challenges posed by the pandemic. Recent instances of countries like Botswana reinstating lockdown measures demonstrate the precarious nature of the current situation. Nevertheless, there is cautious optimism that business conditions will slowly start to improve in the months ahead. Shifting focus to Mauritius, Markus discussed the country's upcoming consumer price inflation figures and predicted a slight increase to around 3.3 percent due to base effects. In April, Mauritius experienced a spike in inflation to 4.2 percent, driven by food inflation. Despite the expected rise in inflation, Markus does not anticipate a significant impact on monetary policy. The Central Bank of Mauritius has already implemented aggressive rate cuts in recent months, and any changes in inflation are unlikely to prompt a tightening of monetary policy at this stage. Overall, the economic outlook for African markets remains uncertain, with recovery expected to be gradual and contingent on the containment of the virus and effective policy measures.