Demand levels in SA’s private sector continued to worsen in March as a result of stronger price pressures, load-shedding, drought conditions and wider economic uncertainty, a survey has found.
The S&P Global SA purchasing managers’ index (PMI) released on Thursday fell to 48.4 in March, down from 50.8 in February. The index is in contractionary territory below the 50-point neutral mark, indicating a slight decline in the private sector’s performance for the second month running.
The index was at its lowest level since July 2023.
Senior economist at S&P Global Market Intelligence David Owen said after February data had provided some hope that economic conditions were stabilising, SA businesses suffered a fresh setback in March, with new business volumes declining at the sharpest rate in more than two years.
“Businesses highlighted a number of factors as culprits, including an additional round of load-shedding and the growing domestic water crisis,” he said.
The March print comes just days after the release of new-vehicle sales and Absa’s manufacturing PMI, both of which came in quite weak. The Absa PMI fell to 49.2 in March from 51.7 in February due to deteriorating business activity and new sales orders.
March domestic vehicle sales registered the steepest monthly decline since the middle of 2021.
The drop in the S&P Global PMI mirrors stagnation in the economy seen in the weak quarter-on-quarter GDP growth of 0.1% in the fourth quarter after a third-quarter contraction of 0.2%.
The S&P Global PMI is much broader than that of Absa, covering businesses in agriculture, mining, construction, manufacturing, domestic trade and business services.
The S&P Global PMI is a composite gauge designed to give a single-figure snapshot of operating conditions in the private sector.
Water crisis
Owen said concern continued to grow that the water crisis could widen in the coming months. “On the other hand, the outlook for load-shedding in 2024 appears more positive, while the backlog at Durban port also looks to be slowing.”
According to S&P Global, after showing signs of stabilising in February new order volumes fell at the sharpest rate in over two years, as stronger price pressures and drought conditions contributed to lower customer demand.
“The new orders subindex moved into reverse gear in March, after almost reaching the 50 mark in February,” Owen said. “In fact, the index signalled the strongest decline in sales at SA companies since December 2021.”
Price pressures also quickened in March, with firms reporting higher supplier charges and fuel costs. Output price inflation lifted to a five-month high, Owen said.
Input costs rose at a faster pace, with both purchase and staff cost inflation reaching seven-month highs.
“Companies often mentioned a rise in supplier charges, as well as increased fuel prices and salary hikes,” Owen said. “These uplifts resulted in a stronger rise in average selling charges. Notably, the rate of output price inflation was the fastest since last October, after falling to a 38-month low in February.”
More positively, staffing and inventories continued to expand. Firms also pointed to an easing of supply side delays amid reports the port crisis in Durban was improving. Companies gave their lowest expectations for future output in three months, although optimism remained strong overall.
Employment levels also increased in spite of weaker sales volumes. However, the uplift softened from February and was only marginal.
Greater working capacity levels supported a moderate reduction in outstanding work.
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