Another step backwards for South Africa
Sentiment in the South African private sector has once again turned negative, despite green shoots in the logistics sector.
The S&P Global South Africa Purchasing Managers’ Index (PMI) – a snapshot of operating conditions in the private sector economy dropped from 50.8 in February to 48.4 in March – below the neutral level of 50.
The ABSA PMI also dropped into negative sentiment, falling from 51.7 in February to 49.2 in March.
The S&P index was at its lowest level since July 2023, with the new orders sub-index moving into reverse in March after nearly hitting the 50.0 growth mark.
“In fact, the index signalled the strongest decline in sales at South African companies since December 2021,” said S&P Global.
Firms said customer orders decreased due to increasing price pressures, load shedding, drought conditions and wider economic uncertainty.
On a more positive note, orders from foreign clients dropped at the softest rate in eight months.
However, weaker sales combined with capacity issues led to a solid reduction in output, with the contraction the quickest seen in 2024 so far.
Firms also gave their lowest expectations for future output in three months, even if optimism remained strong overall.
Although lower client demand led to reduced input needs, firms dropped their input purchases only marginally in March.
Firms also raised their inventories for the third straight month, with reports suggesting that supply chain delays and price concerns caused some to hold inputs in reserve.
“Delays to input deliveries continued in March, primarily due to the ongoing port crisis in Durban, with many firms facing hold-ups on imported goods,” S&P Global said.
“That said, the rate at which lead times lengthened was the softest for six months, as some panellists noted that freight backlogs were starting to improve.”
Absa also noted an improvement in delivery times in its own PMI, with the first signs that congestion at the local ports is easing somewhat.
Employment levels also improved despite weaker sales volumes, even if it was marginal.
Greater working capacity levels also supported a moderate reduction in outstanding work.
Nevertheless, price pressures continued for South African businesses during March, with input costs rising at a faster pace as both purchases and staff cost inflation reached seven-month highs.
“Companies often mentioned a rise in supplier charges, as well as increased fuel prices and salary hikes. These uplifts resulted in a stronger rise in average selling charges,” S&P Global said.
“Notably, the rate of output price inflation was the fastest since last October, after falling to a 38-month low in February.”
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