SA’s private sector economy moved into growth territory in May, expanding at its fastest pace in four years, as firms reported a surge in business activity and a recovery in domestic demand, according to the latest S&P Global SA purchasing managers’ index (PMI).
The PMI rose to 50.8 in May from 50.0 in April, marking the second consecutive month of improvement and the strongest reading since November 2024. The gain reflected a marginal improvement in the health of the private sector economy, as companies reported increases in output, new orders and inventories.
Any figure above 50 indicates growth in private sector operating conditions.
This month’s gains were underpinned by the strongest increase in output since May 2021, as firms ramped up production to meet higher order volumes. The recovery followed a sluggish first quarter and suggested the economy was finding its feet in the second quarter of the year.
“Businesses appear to be recovering sales after a lacklustre first quarter, supporting rising activity and greater purchases,” said David Owen, senior economist at S&P Global Market Intelligence.
“The increase in activity was the strongest observed in four years, while sales growth accelerated to an eight-month high.”
Total new orders rose at their fastest pace since September 2024, driven by renewed domestic client confidence. However, export orders remained under pressure, declining slightly due to weakness in international demand, amid continued global trade uncertainty and the impact of US tariffs.
As demand picked up, businesses responded by increasing their procurement activity, albeit moderately, and stockpiling inputs — with inventory growth reaching its highest level in a year.
Improvements in supplier delivery times also aided operations, with May marking the second straight month of shorter lead times. Some firms cited better material availability and fewer port-related disruptions.
Despite the uptick in activity, employment slipped slightly in May, with some companies citing retrenchments and unfilled vacancies as workloads increased. Backlogs of work rose for the first time in nine months, suggesting some strain on capacity.
On the pricing front, input cost inflation slowed, helped by an appreciation in the rand against the dollar. While purchase costs and wage bills continued to rise, the overall rate of increase was notably softer than in April. In response, firms reduced their selling prices.
“Supply chains continued to look healthier, as monitored firms saw their delivery times shorten for the second month in a row (if only slightly). The lack of supply constraints should aid businesses in their expansion efforts and help keep a lid on prices. Indeed, input price inflation softened in May and was considerably weaker than its trend pace,” Owen said.
Sentiment for the future among businesses improved. The degree of confidence in future output ticked up from April and was slightly above the long-run average.
Companies expressed optimism that improving domestic demand, along with easing supply constraints and more stable prices, would support growth in the months to come.
Still, while survey data points to improving demand and operating conditions, broader concerns remain about the underlying strength of private sector investment.
The PMI was released as Jeff Gable, head of macro and fixed income research at Absa, warned that private sector investment remained under pressure despite recent improvements in operating conditions.
Speaking at the S&P Global Ratings SA conference in Sandton on Wednesday, Gable noted that “the investment line and private sector investment” have “really struggled to grow”.
“There’s been very little investment. The narrative that we were building from last year, [with] load-shedding gone [and] the GNU providing a new political direction, was one that we would finally start to see positive investment decisions taken. And now there's a question mark over that, so that becomes a little bit concerning,” he said.
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