SA business conditions hovered between growth and contraction in September, indicating a broad stagnation in the country’s private sector as cost inflation continues to be steep and load-shedding hampers activity and supply chains.
The S&P Global SA PMI came in at 49.9 points in September, down slightly from 51 in August, which had signalled the first improvement in operating conditions for six months.
Senior economist at S&P Global Market Intelligence David Owen said the latest PMI reading points to “a fairly neutral state” for the country’s private sector.
“New business levels moved even closer to growth territory, but output fell amid sustained load-shedding disruption and cost pressures,” Owen said.
“With many panellists reporting that these factors had also suppressed client demand, this suggests that sales could otherwise be rebounding at this juncture.”
The index is a composite gauge designed to give a single-figure snapshot of operating conditions in the private sector. A reading below 50 shows a contraction in activity while one above 50 indicates expansion.
Owen said though new business levels approached growth territory, output declined due to ongoing disruptions caused by load-shedding and mounting cost pressures.
“The renewed downturn in output affected purchasing trends. Input buying dropped for the sixth time in seven months, after having risen in August in line with increased activity,” Owen said.
In addition, efforts by some companies to cut holding costs contributed to a slight drop in inventory levels, he added.
“Delivery times were again impacted by load-shedding and port delays, lengthening solidly since the prior survey period,” he said.
Owen said companies indicated that rising fuel prices and sustained currency weakness were the main drivers of inflation, though hiring efforts and salary demands underpinned a solid increase in wage costs.
He said more than a fifth of surveyed firms reported an increase in expenses, resulting in the fastest overall increase in costs since May.
“Consequently, output charges were raised once again in September as several firms looked to pass through higher prices to clients. Whilst sharp, inflation was nonetheless softer than the marked rates seen earlier in the year,” he said.
Meanwhile, new order volumes were largely unchanged after a fractional drop in August.
Firms also increased staffing numbers for the second month as part of efforts to get outstanding work levels under control.
Owen said stable demand conditions gave firms additional impetus to raise employment, with the latest data indicating job creation for the second month running.
He said firms often added to their workforces as part of efforts to get outstanding work levels under control, which duly fell for the first time since June.
Businesses were less optimistic about future activity for the second straight month in September, with the degree of confidence easing to the weakest since April.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.