The S&P Global SA purchasing managers index (PMI) edged down in July, reaching its second-lowest level in exactly two years, suggesting the private sector remained stuck in a downturn that may prove difficult to escape.
The PMI, released on Thursday, fell to 48.2 in July from 48.7 in the previous month and in line with market forecasts.
This marked the fifth straight month of contraction and the second strongest in two years after May’s recent nadir, as elevated prices, weak confidence and capacity constraints weighed on overall demand.
The economy-wide PMI has tracked below 50 since March, indicating a challenging operating environment in the private sector.
It comes after the release of the July Absa manufacturing PMI on Tuesday, which showed a sharp decline in business activity partly due to supply-chain problems.
S&P Global Market Intelligence senior economist David Owen said the drop was driven by solid contractions in activity and new business.
The fall was the quickest seen since the start of 2023, as struggling household finances and weak business confidence weighed on overall demand.
Firms also reported a lack of orders due to ongoing load-shedding, and output subsequently declined at a steep rate.
Owen said moreover, employment was cut for the first time since April amid a further drop in new orders.
At the same time, SA firms continued to signal elevated inflationary pressures at the start of the third quarter, as heightened import costs, rising fuel prices and pay pressures weighed on expenses.
The rate of input price inflation even accelerated slightly, as rapid increases in costs were seen in all monitored sectors.
In response, businesses raised their selling prices to a sharp degree in July, in an effort to pass on costs to their customers, Owen said.
He said despite the sustained downturn in business conditions, firms held a stronger view of activity over the next 12 months in July, with the degree of confidence reaching its highest since October 2022.
“In fact, just over half of all survey respondents expect output to grow, although this was often based on hopes that the economy will start to recover,” he said.
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