The private sector economy recorded a marginal improvement in July supported by a rise in new business and steady output levels, according to the latest S&P Global SA purchasing managers index (PMI).
However, input cost pressures accelerated in July — driven largely by rising wages and materials — potentially challenging firms’ margins if sustained.
The PMI rose to 50.3 in July from 50.1 in June, marking a third consecutive month above the 50.0 threshold that separates expansion from contraction.
The latest reading indicates only a slight improvement in overall operating conditions with output largely unchanged, but hiring and new orders showing modest gains.
“Business conditions across SA improved in July, driven by greater sales and increased employment,” said David Owen, senior economist at S&P Global Market Intelligence. “The rise in staffing was the fastest for over a year, showing that firms are more willing to take on new workers in order to boost their capacity and competitiveness.”
Employment growth was recorded for a second consecutive month — and at the quickest pace since May 2024 — as businesses made both permanent and temporary hires. This expansion in capacity helped firms to work through outstanding orders, leading to the sharpest drop in backlogs since February.
New orders picked up after a slight decline in June but economic conditions were still seen as challenging. International demand also remained weak, with export sales falling for the fourth consecutive month amid concerns over global trade policy and currency volatility.
Sector performance remained uneven. Services and, wholesale and retail registered gains in July while construction and industry contracted again.
Business confidence rebounded from a near four-year low in June, with the expectation for output over the next 12 months rising to their highest level since January. Many firms expressed optimism about improved demand and upcoming projects.
Still, cost pressures mounted. The survey recorded the steepest increase in input prices since April, driven by a rise in staff costs and higher costs for fuel and raw materials. Wage inflation climbed for the third consecutive month and remained well above the survey’s long-run trend.
Though some of these cost increases were passed on to clients, the rise in selling prices was modest and slightly slower than in June. Companies suggested the cost jump may prove temporary and were cautious about pricing amid ongoing demand uncertainty.
Unlike other sectors, construction firms saw declines in both their input costs and the prices they charged for finished work.
“There was also a solid recovery in business expectations in July,” Owen said. “Firms highlighted a slight improvement in the demand outlook, although there were still concerns about global trade policy and exchange rate movements.”
Supplier performance continued to improve, with delivery times shortening for the fourth consecutive month as port congestion eased. This helped support modest growth in input purchases, though the pace of stockpiling slowed.
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