Latest news with #RaymondParsons
IOL News
02-07-2025
- Business
- IOL News
Manufacturing industry sentiment shows slight improvement, still in contraction
The Absa Purchasing Managers' Index (PMI) June 2025 released on Tuesday increased by 5.4 points to 48.5 in June 2025 but remained in contractionary territory for the eighth consecutive month.. Sentiment in the manufacturing industry in South Africa remained in the contractionary territory despite ticked up slightly in June, marking its second-highest reading of the year. Data from the Absa Purchasing Managers' Index (PMI) on Tuesday revealed a modest recovery in South Africa's economic landscape, with the index rising by 5.4 points to reach 48.5 in June from 43.1 in May. Despite this encouraging movement, the PMI indicated that the economy remained in contractionary territory for the eighth consecutive month., revealing the ongoing struggles facing the nation. Nonetheless, economists welcomed this increase, noting that the 5.4-point gain stood as the most significant rise since the 9-point jump recorded between August and September of 2024. Nkosiphindile Shange, economist at the Bureau for Economic Research, which conducts the PMI on behalf of Absa, said new sales orders increased by 7.8 points to 46.1 in June, signalling some recovery in demand. 'While export sales recovered somewhat in June relative to May, volumes remain near the lowest levels seen this year. This suggests that domestic demand boosted the large recovery in total new sales orders,' he said. 'However, the improvement in demand failed to boost production as the business activity index decreased by 1.5 points to 41.9 points in June.' In response to the uptick in orders, the supplier deliveries index also noted an increase, rising by 6 points to 55.1, which signals extended delivery times linked to heightened order volumes. Interestingly, there were no significant supply bottlenecks reported, implying that suppliers have coped with the heightened demand so far. On a more positive note, the employment index recorded a substantial jump of 9.7 points to 49.7, marking its highest level since March 2024. Despite this encouraging trend, economists cautioned that continued improvements are necessary before asserting that the manufacturing sector is on a path of recovery. The purchasing price index, indicating inflationary pressures, continued its downward trajectory, decreasing by 2.3 points to 58.1 in June. Economists noted that the stronger performance of the rand—averaging 40 cents firmer against the dollar throughout June—coupled with a decline in diesel prices earlier in the month, played a role in this positive movement. Professor Raymond Parsons, an economist from the North West University, said this was a positive but modest trend. Parsons said the priority now was to build on the incipient economic upturn in ways that guarantee a sustained recovery. 'Although higher in June 2025, the Absa PMI again, nonetheless, confirms that the SA economy is still struggling to gain momentum. By still being in negative territory for an eighth consecutive month, high-frequency data like the Absa PMI is still sending out mixed signals about the strength of the economic recovery,' Parsons said. Efficient Group chief economist, Dawie Roodt, said the problem with the South African economy was mainly growth, or lack thereof. 'We are flirting with recession; it's just not going anywhere at the moment. What we actually need is some sort of jolt, some sort of reaction from politicians to get the economy out of this situation,' Roodt said. 'The PMI illustrates this that it's a little better, but it's still in contractionary territory. It's not good; we need new policies and ideas for something different to get the economy growing.' Investec chief economist, Annabel Bishop, said the manufacturing sector's contraction was reflective of the insufficient capacity of the ports and rail to export out bulk commodities. 'Progress on improving Transnet's capacity, on both the rail and port sides to end the domestic freight crisis that weakens South Africa's growth rate, continues to be too slow, with both mining and manufacturing production contracting in Q1.25,' she said. 'Bouts of load shedding starting up this year signify insufficient electricity supply to consistently meet demand when planned and unplanned maintenance occurs, with the country's extremely aged electricity distribution system prone to breakdowns. 'In the main, while load shedding remains largely in abeyance, economic growth does put strain on the aged grid and limits the economy's growth beyond 1.0% y/y, with the PPP's planned to drive improved supply conditions yet to sufficiently occur.' BUSINESS REPORT
The Citizen
30-06-2025
- Business
- The Citizen
Policy Uncertainty Index drops slightly while global and local uncertainty remain
When economic policy uncertainty is strongly present in the environment, it lowers investment, employment and output. The Policy Uncertainty Index for the second quarter has decreased slightly but remains deep in negative territory as the global outlook remains uncertain despite the US promising to reduce tariffs on goods imported from South Africa. According to the NWU Business School Policy Uncertainty Index (PUI) for the second quarter, policy uncertainty eased to 75.9 compared to its record high of 78.6 in the first quarter of the year. The Index was launched in early 2016 and is published annually in January, April, July, and October. An increase beyond 50 reflects heightened policy uncertainty, while a decline means reduced uncertainty. The Policy Uncertainty Index is expressed as a net balance, representing the net outcome of positive and negative factors that influence the calibration of policy uncertainty. The three elements constituting the latest Policy Uncertainty Index show: The media data reflected a modest decline in references to policy uncertainty The survey of economists almost universally assessed policy uncertainty to be more or less unchanged The University of Stellenbosch's Bureau for Economic Research survey of manufacturers experiencing policy/political uncertainty was slightly up from 77 to 80. ALSO READ: Policy Uncertainty Index drops sharply due to various local and global risks Partial respite on trade with suspension of US tariffs for Policy Uncertainty Index Professor Raymond Parsons, an economist at the NWU Business School, says that while the global outlook is highly uncertain, there has been a partial respite on the trade front, as the US administration has suspended most, but not all, tariff hikes until July 9, pending further negotiations. 'Internally, although there have been some positive developments, they were outweighed by negative factors.' Parsons says the global economic growth outlook was further trimmed by international organisations such as IMF and the OECD that reduced growth forecasts for most major economies, including the US economy, except for the EU economy, where modest growth is still anticipated 'The downward revision of various global economic growth outlooks therefore stems from a convergence of geopolitical risks, elevated economic uncertainty due to 'Trumpanomics' and erratic tariff decisions and a tangible repricing of risks in financial markets generally. 'These overall economic assessments were reinforced by the Israeli-Iran conflict, further increasing global economic uncertainty. (This Policy Uncertainty Index was finalised before the US attack on Iran).' Parsons also points out that the US Fed decided to leave interest rates unchanged for the fourth time in June, while the World Bank assesses that the Sub-Saharan economy will grow by 3.5% in 2025, rising to 4.3% in 2026-2027, but with the usual associated risks and uncertainties. ALSO READ: Policy Uncertainty Index falls, confirming uneven economic recovery Positive factors for South Africa: lower inflation and repo rate in Policy Uncertainty Index In the second half of 2025, positive factors in South Africa over the past quarter included lower inflation and easier interest rates, and if the inflation outlook continues to stabilise, there is the possibility of another modest cut in borrowing costs later in the year, Parsons says. 'There is also now the prospect that South Africa may be off the Financial Action Task Force (FATF) grey list by the end of 2025, which will mean that borrowing costs will be lowered for South Africa. 'At the policy level, the most important development in the second quarter, which is necessary to promote, was probably parliament's eventual finalisation and acceptance of a 'pragmatic' third 2025-26 Budget, but without the controversial VAT [value-added tax] increase. 'However, if the various key parameters in the Budget are not met, future risks to fiscal sustainability remain.' ALSO READ: Business Leadership CEO expresses worry about recent GNU tensions Negative factors to beware of in second half of 2025 in Policy Uncertainty Index Parsons also points out that negative factors offsetting the positive ones in the second quarter include: The muted high-frequency data in recent months The disappointing 0.1% gross domestic product (GDP) growth in the first quarter National Treasury and the South African Reserve Bank are scaling down growth forecasts for 2025 and Higher unemployment. 'The weak fixed capital investment trends revealed in the GDP figures for the first quarter also raised a red flag, and heightened planned infrastructural spending must urgently respond. If present trends persist, the present GDP growth outlook for 2025 is about 1%, increasing to about 1.5% next year.' He warns that the developing economic recovery in South Africa is struggling to gain momentum and says the country needs a strategic pivot in growth policy to create the extra economic buffers required to deal with external shocks. 'The GNU's policy agenda for a 3% GDP growth target in the medium term therefore now urgently needs an impulse, a jolt, an acceleration, so that the tailwinds in the economy outweigh the headwinds in 2025 and beyond.' ALSO READ: Policy uncertainty in SA increased, but GNU could be positive influence Negative trends in Policy Uncertainty Index that can be reversed Parsons says that although the Policy Uncertainty Index for the second quarter remains well in negative territory for now, these trends proved to be reversible in the past if the right actions are taken through policies and actions under South Africa's control. 'In any event, the emerging economic recovery at present is battling to gain traction and therefore needs maximum support to underpin the business cycle upturn. A strategic pivot in investment and growth policies is also needed to create the extra economic buffers required to deal with emerging external shocks.'
IOL News
30-06-2025
- Business
- IOL News
Slight easing in policy uncertainty, but economic landscape remains challenging
The North West University Policy 2Q 2025 Uncertainty Index (PUI) released on Monday indicated that the index eased to 75.9 compared to its record high of 78.6 (baseline 50) in 1Q 2025 but still remained in negative territory. Image: File The North West University Policy Uncertainty Index (PUI) for the second quarter of 2025, released last week, has indicated a slight easing, dropping to 75.9 from a record high of 78.6 in the first quarter of 2025. However, this figure still reflected a landscape fraught with economic uncertainty as it remained well below the baseline level of 50. Professor Raymond Parsons, an economist at the North West University Business School, commented on the index's modest decline, framing it as a response to both internal and external factors impacting South Africa's economy. Externally, while the global economic outlook continues to be unstable, Parsons said there has been a measure of relief on the trade front, particularly as the US administration has put a hold on most tariff hikes until July 9. This delay hinges on ongoing negotiations that could further influence international trade dynamics. 'The downward revision of various global economic growth outlooks therefore stems from a convergence of geopolitical risks, elevated economic uncertainty consequent on 'Trumpanomics' and erratic tariff decisions, and a tangible repricing of risks in financial markets generally,' he said. Specifically, international organisations such as the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have recently downgraded their growth forecasts for most major economies, including the United States. The only exception appears to be the European Union, which is still expected to see modest growth. Domestically, South Africa is heading into the second half of 2025 with a mix of economic signals. On one hand, recent quarters have shown evidence of lower inflation and a potential easing of interest rates. Parsons said should the inflation outlook stabilise, there may be room for another modest reduction in borrowing costs. Additionally, he said there was hope that South Africa could exit the Financial Action Task Force's (FATF) grey list by the end of 2025, which would further lower borrowing costs. 'There is the possibility of another modest cut in borrowing costs later in the year. There is also now the prospect that SA may be off the FAFT's grey list by the end of 2025, in which case borrowing costs will be further lowered for SA,' he said. However, Parsons cautioned that the positive indicators are offset by significant negative elements. In particular, he noted that the country experienced a disappointing GDP growth of just 0.1% in the first quarter of the year, coupled with downgrades of growth projections by both the National Treasury and the South African Reserve Bank (Sarb). Elevated unemployment rates and muted high-frequency data exacerbate these challenges. Parsons said that at the policy level, the most important development in the second quarter which is necessary to promote certainty was probably the eventual finalisation and acceptance by Parliament of a 'pragmatic' third 2025/26 Budget, but without the controversial VAT increase. 'However, if the various key parameters in the Budget are not met, future risks to fiscal sustainability remain,' he said. Parsons urged that the National Government's agenda for a 3% GDP growth target in the medium term requires a significant boost to ensure that the economy's tailwinds can overcome the prevailing headwinds in the years to come. 'A strategic pivot in growth policy is needed to create the extra economic buffers required to deal with external shocks,' he said. 'The GNU's policy agenda for a 3% GDP growth target in the medium term therefore now urgently needs an impulse, a jolt, an acceleration, so that the tailwinds in the economy outweigh the headwinds in 2025 and beyond.' BUSINESS REPORT
Eyewitness News
04-06-2025
- Business
- Eyewitness News
Experts say economic momentum remains elusive after weak GDP growth
JOHANNESBURG - Experts said economic momentum remains elusive after GDP grew by an anaemic 0.1% in the first quarter of 2025. Agriculture bloomed in the three months under review, giving the economy a massive lifeline of 15%. But chronic challenges in mining and manufacturing offset agricultural wins, pulling performance down. Statistics South Africa (Stats SA) released the latest GDP figures on Tuesday. While economists at Nedbank said they didn't expect fireworks, the quarter one GDP figures were disappointing. Although adverse global developments earlier in 2025 also played a role, an economist at the North-West University Business School, Raymond Parsons, said the weaker economic data was already apparent before then. He said that the ABSA Purchasing Managers' Index for May had remained in contractionary territory for seven consecutive months, despite showing some recent signs of business activity and demand improvement. He said the key manufacturing sector was likely to continue to be a lagging one for now. If the challenges persist, Parsons said the growth outlook for 2025 now seemed likely to be only about 1%, lower than projections by the South African Reserve Bank (SARB) and National Treasury.
The Citizen
13-05-2025
- Business
- The Citizen
Increased unemployment rate red flag for weak economic growth
South Africa needs economic growth of at least 3% per year to create enough jobs for South African. GDP growth of 1% will not help. The 1% increase in the unemployment rate to 32.9% for the first quarter of 2025 is a red flag for weak economic growth after the outlook for GDP growth in 2025 was already downgraded. Professor Raymond Parsons, economist at the NWU Business School, says that with various institutions and economists already downgrading gross domestic product (GDP) growth to about 1.5% and below, it is not unexpected that this is now reflected in higher unemployment levels. 'The overall total unemployment level is now where it was a year ago, and youth unemployment in particular remains at an unacceptable magnitude. The latest increase in unemployment again confirms that economic growth in South Africa has been too low for too long. 'There is no magic wand to create jobs overnight, as the disappointing unemployment picture is the cumulative outcome of seasonal, cyclical and structural factors. The deteriorating employment outlook, nonetheless, again reinforces the fact that the third Budget next week must be a growth-driven one.' Parsons says Budget 3.0 must create a policy environment that promotes economic expansion and boosts investor confidence, and must be dedicated to policies and projects that demonstrably support the commitment of the government of national unity (GNU) to at least 3% GDP job-rich growth in the medium term. ALSO READ: Jobs bloodbath as unemployment increases by 1% in first quarter Unemployed less likely to find a job as sustained growth remains elusive Jee-A van der Linde, senior economist at Oxford Economics Africa, says the unemployment statistics from Statistics SA's latest Quarterly Labour Force Survey show that businesses and households employed fewer people at the start of 2025. 'Weak domestic demand means that South Africans are increasingly downcast about their prospects of landing a job. Sustained job growth remains elusive in South Africa, and unless government can fast-track more business-friendly policies, the situation is not expected to improve. 'The higher-than-expected unemployment rate at the start of 2025 does not fundamentally change our outlook for the labour market, as the baseline assumes that the unemployment rate remains at these elevated levels over the forecast period.' However, he says Oxford Economics Africa will make revisions to account for the higher starting point for 2025. 'The quarterly decline in employment suggests that households came under pressure at the start of this year and indicates that businesses employed fewer people amid deteriorating demand conditions. 'In addition, the increase in unemployment does not yet reflect the impact of US tariffs. This would have weighed on business sentiment, resulting in companies scaling back employment and investment plans due to heightened uncertainty. It is therefore plausible that South Africa's unemployment rate could rise further in the second quarter.' ALSO READ: SA needs real jobs, not cosmetic unemployment figures Need for faster and labour-intensive growth to counter unemployment Thanda Sithole, senior economist at FNB, says the absorption rate decreased by 0.8 percentage points to 40.3%, suggesting a moderate deterioration in the economy's ability to create jobs. 'At this rate, a significant proportion of the working-age population is still left out of the economy, emphasising the need for faster and labour-intensive growth. 'The weak employment data for the first quarter reflects subdued quarterly economic activity and suggests that the labour market remains structurally constrained amid weak economic growth and a persistently high youth unemployment rate. 'The near-term cyclical outlook for the labour market is clouded by elevated global uncertainty, including the impact of US trade tariffs. However, continued structural reforms should, over the medium term, support employment creation.' ALSO READ: SA's economic growth outlook growing increasingly dim Uncertainty around GNU and US tariffs affect jobs Busisiwe Nkonki, Johannes Khosa and Nicky Weimar, economists at the Nedbank Group Economic Unit, say the labour market outlook appears stable amid easing structural constraints, although cyclical factors are expected to become less supportive. 'Uncertainties related to the stability of the GNU and potential US tariffs are likely to hinder confidence and affect economic activity. The mining and manufacturing sectors are particularly vulnerable, facing challenges from subdued global growth and falling commodity prices, which will affect their export capabilities. 'The anticipated tariffs from the US present additional obstacles, creating a less favourable environment for hiring in these industries. Despite the challenges facing manufacturing and mining, the agricultural sector is projected to thrive due to favourable weather conditions.' They say the anticipated deterioration in economic conditions is a concern, particularly as weaker global demand further affects key industries. 'We forecast GDP to grow by 1% in 2025 and 1.6% over the next three years. Considering the balance of drivers, we expect modest declines in the unemployment rate over the next two years.' ALSO READ: 'Losing the war against unemployment': Higher Education misses skills programme target by 64% Additional interest rate cuts can help to halt decline Frank Blackmore, lead economist at KPMG South Africa, says if we can get additional interest rate reductions before year-end to help support economic growth, we may be able to halt the decline in jobs. 'Otherwise, we will require a much higher growth rate to absorb the economically unemployed in the South African economy, and that will obviously mean policy changes, attracting greater investment and allowing the private sector economy to create jobs by supporting the underlying infrastructure of the South African economy.' ALSO READ: Improvement in unemployment rate, but SA still needs almost 8 million jobs Unemployment casting shadow over country's recovery efforts Casey Sprake, economist at Anchor Capital, says it is clear that South Africa continues to grapple with a relentless increase in unemployment, casting a shadow over the country's recovery efforts. 'While recent key reform measures point to a more positive trajectory, this progress has not yet trickled down to many South Africans in the form of job opportunities. 'Structural challenges, such as a skills gap, labour market rigidities and the lingering impact of the Covid-19 pandemic, have exacerbated unemployment rates, especially among the youth. As the economy expands, the persistent lack of jobs threatens to widen the inequality gap, undermining social stability and eroding the gains of recent economic advancements.' A combination of structural deficiencies, such as a lack of skills, limited access to quality education and training, and inadequate job creation, has resulted in a large portion of the population being unable to find gainful employment, Sprake says. 'South Africa's unemployment problem remains particularly acute among the youth, where high levels of unemployment hinder their prospects and exacerbate social inequalities.' ALSO READ: The dark picture of youth unemployment in South Africa Youth unemployment points to structural issues in SA economy According to Sprake, the increases in the unemployment rate for young people, as well as the unemployment rate according to the expanded definition, point to longer-term, structural issues within the local economy, as it is difficult to reincorporate and entice discouraged work seekers back into the labour force. 'In addition, in the domestic economy, material job creation has only occurred when GDP growth approaches 3% per year. Therefore, the economy is simply not growing at an adequate rate to sustainably boost long-term employment prospects for South Africans. 'At the end of the day, South Africa's unemployment problem is a complex and multifaceted issue that requires sustained and coordinated efforts from all sectors of society to create inclusive and sustainable employment opportunities for all South Africans.'
