JOHANNESBERG, July 6 – South Africa’s private sector returned to growth in June as easing inflation helped support business activity, although demand and business confidence remained under pressure.
The latest S&P Global South Africa Purchasing Managers’ Index (PMI) rose to 50.5 in June from 49.6 in May, moving back above the 50 point mark that separates growth from contraction.
According to S&P Global Market Intelligence, the improvement was driven largely by continued hiring across businesses, while declines in output and new orders were less severe than in the previous month.
Output and new business both fell for a second straight month as companies pointed to weaker customer spending, economic uncertainty and still high prices. However, export demand provided some support, with new foreign orders returning to growth after declining in May. The services sector was the only area to record an increase in new work.
Businesses also continued to add both permanent and temporary workers to expand capacity, although the pace of hiring slowed slightly. At the same time, outstanding work remained weak for a ninth consecutive month.
One of the strongest signals from the survey was the slowdown in inflation. Input cost inflation eased sharply after reaching its highest level in nearly four years in May, while the pace of output price increases also moderated, despite businesses continuing to pass on higher fuel costs.
Meanwhile, supplier delivery times lengthened slightly as imported shipments slowed and vendors faced capacity constraints. Purchasing activity edged higher, with companies also increasing their input inventories for the third time in four months.
Despite the return to growth, S&P Global said business confidence weakened further, with optimism falling to its lowest level in almost five years as firms continued to expect economic challenges in the months ahead.
