South African businesses continued to signal a decline in activity at the start of the second half of the year, and the downturn had worsened since June amid weakening sales and greater supply side pressures.
The S&P Global South Africa Purchasing Managers’ Index (PMI) released yesterday showed output and new business both dropped at the sharpest rate in four months, while port congestion both domestically and abroad led to a faster deterioration in vendor performance, a statement said.
“Nevertheless, firms gave several reasons to remain upbeat that the coming 12 months will prove more fruitful. Many suggested that the stabilisation in the political landscape should lead to greater confidence and a pick-up in spending, while reduced load shedding and softer price pressures are also expected to support growth,” said S&P Global Market Intelligence economist David Owen.
The PMI survey data showed input price inflation still at a much cooler pace compared to recent trends and output charges rising at the slowest rate in nearly four years.
“This should be encouraging for the Reserve Bank, who will be looking for signs as to when monetary policy can be eased,” said Owen.
Inventories of inputs were depleted in July as businesses reduced purchases and opted to run down stocks in order to finalise backlogs.
Greater optimism about future activity prospects was indicated by output projections rising to their highest level since February 2022, with increased political stability often cited as an anchor for growth.
Mild price pressures also remained a boon for companies, despite mild cost inflation, leading to the slowest rise in output prices for almost four years.
The S&P Global South Africa PMI – a composite gauge designed to give a single-figure snapshot of operating conditions in the private sector – registered 49.3 in July, little changed from 49.2 in June, and below the neutral 50.0 mark for the second consecutive month.
The PMI indicated another slight deterioration in the health of the private sector.
Output levels at South African firms dropped at a sharper pace during July, with the downturn notably spread across all sectors covered by the survey.
Companies mostly linked lower output to a drop in new business, following reports that clients had restricted spending in the subdued economy.
Activity and demand both fell at the strongest pace in four months. As well as reduced sales, some firms signalled that challenges getting inputs delivered on time had curtailed activity. Slower deliveries were often a result of port delays in South Africa and abroad, with lead times worsening.
Meanwhile, the seasonally adjusted Absa PMI for July that was released last week, reported a 6.7 points increase to 52.4 in July 2024, up from 45.7 in June 2024, following a weak May and June. The Absa PMI survey results showed that both domestic and global demand picked up, filtering through to higher activity.
The Absa PMI business activity index increased by 14.5 points to 50.8 in July. This was supported by new sales orders rising by 17.5 points to 55.4. Both these indices returned to the expansionary territory for the first time in three months, following a poor performance in May and June.
BUSINESS REPORT