The S&P Global purchasing managers index (PMI) ticked up in March as South African businesses accelerated the rate of hiring workers and increased inventories, but the Middle East conflict led to supply chain constraints.
The PMI edged up to 50.8 in March from 50.0 in February, pointing to the first upturn in business conditions for six months, S&P Global said.
“South African businesses hired staff at a quicker rate and built up inventories during March, supporting a slightly greater expansion in private sector activity.”
Output and employment recorded larger gains, while stocks of purchases expanded for the first time in four months. Where output was lifted, companies reported taking on new projects and renewed efforts to build stocks.
New project starts also contributed to higher staffing capacity, resulting in the biggest rate of job creation since May 2024.
However, the war in the Middle East contributed to supply chain stresses and client hesitancy, hitting new business volumes, S&P Global said.
This is the latest indication that local businesses and the domestic economy will not be left unscathed by the war pitting the US and Israel against Iran, which has hit global oil supply and sent prices soaring.
Iran showed no sign of agreeing to US President Donald Trump’s demand that it open the Strait of Hormuz by the end of Tuesday or suffer massive attacks on its civilian infrastructure.
The strait is a critical gateway through which about a fifth of the world’s oil and liquefied natural gas pass daily.
Input price inflation accelerated in South Africa during March, driven by heightening fuel prices, a stronger US dollar and changes to the minimum wage. As a result, output charges rose to the greatest extent in more than a year, S&P Global said.
The survey data showed heightened economic uncertainty and international supply chain disruptions due to the war had interrupted activity in South African companies, including a quicker decline in new orders driven by a fall in export sales that was the most pronounced in just more than two years.
Panel members reported hesitancy among foreign clients and fluctuations in exchange rates, resulting in a loss of orders. Overall delivery times lengthened in March, with the rate of increase quickening to a 16-month high.
Companies reported disruptions to sea freight linked to the Strait of Hormuz and associated supply bottlenecks. Input delays contributed to the slowest reduction in backlogs of work for six months.
“Amid evidence of stock building and starting pending projects, businesses raised their output at the fastest rate in six months, strengthened the pace of job creation, and increased their input stocks for the first time since November,” said David Owen, a senior economist at S&P Global Market Intelligence.
“On the other hand, the steep drop in export orders, combined with greater delivery delays and input cost pressures, all of which linked to the war in the Middle East, points to a degree of trouble ahead for South African firms.”
The S&P Global PMI provides a snapshot of operating conditions in the private sector, with readings above 50 signalling an improvement in business conditions from the previous month, while those below show a deterioration.
Last week a separate report showed Absa’s PMI, which focuses on activity in the manufacturing sector, edged up by 1.6 index points to 49 in March, but costs were increasing in response to the Middle East war even before domestic fuel price increases were announced by the department of mineral and petroleum resources.
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