SA’s private sector economy sent mixed signals in June, with firms hiring more staff even as business confidence fell to its lowest level in nearly four years, according to the latest S&P Global SA purchasing managers’ index (PMI).
The PMI for SA fell to 50.1 in June from 50.8 in May, narrowly remaining above the 50.0 threshold that separates improving business conditions from deterioration.
Output levels contracted for the first time in three months marking a sharp reversal after May’s output growth reached a four-year high. Weakness was broad-based across sectors with the exception of services, which continued to report gains.
New orders fell fractionally, ending a two-month recovery, with survey respondents citing ongoing weakness in export demand and softer local spending. Export orders registered a third consecutive decline as global trade conditions remained under pressure.
Business confidence deteriorated sharply, with sentiment dropping to its weakest level in four years.
“The drop in business expectations to their lowest since July 2021 shows that firms are growing increasingly nervous about the domestic and non-domestic economic outlook,” said David Owen, senior economist at S&P Global Market Intelligence.
Policy uncertainty has important implications for business confidence and the investment climate in the country, as also proved by the Policy Uncertainty Index, released by the North West University’s (NWU’s) Business School just last week.
The index for the second quarter of 2025 eased to 75.9 compared to the first quarter’s 78.6 (baseline 50) as negative factors outweighed positive domestic developments.
On July 9, US President Donald Trump will reinstate the tariffs he imposed on countries around the world.
On a more positive note, Owen noted the latest S&P survey data still suggested that companies were willing to expand their headcounts and store more inputs. Despite weaker sales, companies increased employment in June, with headcounts rising at the fastest rate in over a year. Growth was primarily driven by hiring in the services sector.
Firms continued to add to their inventories, but at a slower pace as buying activity cooled with weaker demand. Supply chains stayed stable, and delivery times improved for a second month in a row, marking the longest stretch of progress in almost nine years (even though the latest decrease in lead times was minimal).
Cost pressures intensified during the month, as input prices rose solidly across all sectors. Labour costs were a particular driver of inflation, with wages rising at an above-average pace. Even so, businesses kept modest price increases. Some firms reported cutting prices in response to a firmer rand.
According to Owen, while the headline PMI dropped to 50.1 in June, eroding much of the growth in private sector conditions seen during May’s six-month high, “this was still a higher reading than those recorded in the first quarter, adding to estimates of a solid upturn in the second quarter GDP”.
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