Despite some positive indicators in the logistics sector, sentiment within the South African private sector has taken a downturn, as revealed by the latest S&P Global South Africa Purchasing Managers’ Index (PMI). The PMI, serving as a barometer of operating conditions in the private sector economy, dropped from 50.8 in February to 48.4 in March, falling below the neutral level of 50.
Firms participating in the survey cited various factors contributing to the decline in sentiment, including dwindling customer orders attributed to increasing price pressures, persistent load shedding, drought conditions, and broader economic uncertainty.
However, amidst the gloom, there were some positive developments. Orders from foreign clients decreased at the slowest rate in eight months. Yet, this was not sufficient to offset the impact of weaker sales and capacity issues, resulting in a significant reduction in output – the sharpest contraction witnessed in 2024 thus far.
Despite the prevailing challenges, firms maintained a degree of optimism, albeit subdued, regarding future output. However, their expectations for future output hit a three-month low.
Despite reduced client demand, firms marginally decreased their input purchases in March. Meanwhile, inventory levels rose for the third consecutive month, with supply chain delays and price concerns prompting some to stockpile inputs.
Delays in input deliveries persisted, primarily due to the ongoing port crisis in Durban, although the rate of lengthening lead times eased slightly. Absa’s PMI also noted improvements in delivery times, indicating a gradual easing of congestion at local ports.
Employment levels saw a marginal improvement despite weaker sales volumes, and greater working capacity levels supported a moderate reduction in outstanding work.
Nevertheless, price pressures persisted for South African businesses, with input costs rising at a faster pace, alongside increased staff costs. This led to a stronger rise in average selling charges, with output price inflation reaching its fastest rate since October.
The ABSA PMI also registered a drop in sentiment, falling from 51.7 in February to 49.2 in March, reflecting the broader negative trend.
Overall, the S&P index hitting its lowest level since July 2023 signals another setback for South Africa, with the new orders sub-index indicating the strongest decline in sales since December 2021. Despite pockets of resilience, the challenges facing the South African private sector continue to pose significant hurdles to economic recovery and growth.
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