The S&P Global South Africa Private Sector Purchasing Managers' Index (PMI) fell to 49.6 in May from 51.6 in April.
This was the first time the PMI had dropped below the neutral 50-point mark in five months.
S&P Global It said that despite the poor business environment in May, a good pipeline of new work, advertising plans and expectations of stable market conditions supported confidence in the year ahead's outlook for business activity. In fact, sentiment strengthened and was the highest year-to-date.
it was like may Manufacturing PMI Which suggested that purchasing managers expected that by the end of the year business conditions would be better than today. The expectations index rose from 47.4 in April to 52.9 in May.
The decline in May was due to a renewed decline in both output and new orders. New business has declined for the third time in the last four months.
New export orders also declined, albeit marginally.
S&P Global said anecdotal evidence suggests that uncertainty caused by the war in the Middle East and rising fuel prices have had a negative impact on demand, which has deterred customers from committing to new projects.
High fuel prices were also a factor behind the slight decline in production. This was the first decline in five months. Stormy weather in Cape Town and elsewhere also contributed to the shortage.
In May, activity in three out of four sectors had declined. This was led by the wholesale and retail sectors. Services were the only category that managed to grow.
S&P Global noted that the impact of higher fuel costs was clearly visible on purchase prices, which rose at a very rapid pace in May. The rate of growth became the fastest since July 2022.
As a result, companies responded to higher input costs by increasing their selling prices accordingly. This means that the pace of sales price growth reached its highest level in 46 months. Tariff inflation was observed in all four monitored sectors.
good news
The good news was that staffing levels increased for the fourth consecutive month, and at a solid pace, the fastest since September 2022.
Panelists said new employees have been hired to fill vacant positions and complete projects more quickly.
In contrast to the increase in headcount, companies have cut both their purchasing activity and stocks of inputs for the first time in three months. In each case the rates of decline were modest. This was because respondents expressed reluctance to buy and hold inputs at a time of falling demand.
Supply chain disruptions meant some respondents reported difficulty obtaining input materials. This meant that the stock was about to be exhausted.
As a result, suppliers' delivery times increased for the fifth consecutive month. The reason for the increased length was cited to be high fuel costs and shipping delays. This was one of the reasons for the decline in the S&P PMI in May.