South Africa PMI shows fifth month of growth amid easing cost pressures

Investing.com -- South African private sector business conditions improved for the fifth consecutive month in September, with the S&P Global South Africa Purchasing Managers’ Index (PMI) registering 50.2, slightly up from 50.1 in August.

The latest data showed continued expansion in both output and new orders, with companies reporting higher customer demand and new contract wins. New export orders increased for the first time since March, primarily driven by stronger demand from African markets, which offset weakness from the US and Europe.

Cost pressures continued to ease, with input price inflation falling to an 11-month low in September. Only 3% of surveyed businesses reported month-on-month cost increases. This moderation in costs was partly attributed to a better exchange rate against the US dollar and lower headcounts.

"Another softening of price pressures in September is a further boon to South African companies, suggesting that CPI inflation could decline again from its recent high in July, especially as many firms passed these cost savings onto customers," said David Owen, Senior Economist at S&P Global Market Intelligence.

Supply conditions also showed improvement, with delivery times shortening for the sixth straight month due to better material availability and reduced congestion. This positive environment encouraged firms to expand their purchasing activities, though the rate of increase was modest and slower than in August.

Despite these positive indicators, employment at private sector firms decreased for the second consecutive month, primarily due to difficulties finding staff replacements. This contributed to the first rise in work backlogs since August 2024.

Business confidence regarding future activity declined to its lowest level in over four years. Less than a third of firms expected output growth over the next 12 months, with many citing economic and political uncertainty as concerns.

Owen noted that historically, the current PMI readings have indicated a higher likelihood of interest rate cuts. "While the Monetary Policy Committee opted not to implement a cut in its latest meeting, some members expressed support for such a move, suggesting that further moderation in inflationary pressures could pave the way for a cut in November," he added.

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