SA’s private sector started 2025 on weak footing, as business conditions deteriorated sharply in January, according to the latest S&P Global SA purchasing managers’ index (PMI).
The PMI, which tracks business conditions in the private sector, fell to 47.4, down from 49.9 in December, marking its lowest level since July 2021.
A sharp drop in client demand was the key driver behind the contraction, the ratings agency said.
The latest reading also marks the second consecutive month that the index remained below the 50.0 no-change threshold, indicating a worsening economic climate.
Low client demand meant new business volumes fell at their fastest rate since March 2024, with companies citing lower customer incomes and weaker foreign demand as primary concerns. New export orders also declined for the fifth consecutive month, exacerbating the downturn.
Business activity in the services sector bore the brunt of the slowdown, while industrial production was the only segment to show signs of resilience, registering modest growth.
With demand under pressure, firms shifted their focus to clearing backlogged work, resulting in a solid reduction in outstanding orders, according to S&P Global’s report.
This led to renewed cutbacks in staffing levels and purchasing activity — especially in the services and construction sectors. However, job losses were relatively mild and largely affected short-term workers.
Despite the downturn, there were positive signs for supply chains and inflation. Delivery times, which had been affected by port congestion in Durban and shipping disruptions, saw only a mild increase, the weakest in nine months. This suggests that fewer supply bottlenecks could help stabilise business operations.
On the pricing front, input costs continued to rise, driven by higher wages and import fees, but the overall rate of inflation remained moderate. Firms increased selling prices for the third consecutive month, but at a slower pace than before.
Looking ahead, business sentiment improved in January, with 41% of surveyed companies expecting growth in 2025, up from December’s 20-month low. However, uncertainty remains over whether demand will recover in the near term.
Senior economist at S&P Global Market Intelligence, David Owen, noted businesses were struggling to regain customers following the slow start to the year, which could weigh on first-quarter growth. However, improving supply conditions and controlled inflation provide some stability.
“The inflation outlook appears promising, although dollar exchange rates may be volatile in the near term as the Trump administration sets out its fiscal and foreign policy, which could aggravate purchase prices,” Owen said.
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.