Business conditions at South African firms continued to improve in August, the latest PMI data showed, although the rate of growth eased amid signs of a slowdown in customer demand.
This comes after consumers were hit by steep price increases in July, with headline annual inflation rising to a 13-year high of 7.8 percent due to elevated fuel and food costs.
The S&P Global South Africa Purchasing Managers’ Index (PMI) edged lower to 51.7 points in August from a 14-month high of 52.7 points in July.
This reading signalled a modest improvement in business conditions in three months.
S&P Global said both output and new orders grew for the fourth consecutive month, albeit at a slower pace, as customer demand appeared to ease.
The rate of expansion softened to a three-month low, with some businesses reporting that clients had reined in spending due to growing headwinds in the global economy.
Meanwhile, job creation remained solid, with the rate of growth only fractionally slower than July's 13-month high.
S&P Global Market Intelligence economist David Owen said there were early signs that customer confidence was starting to wane due to high inflation and global recession fears.
Owen said employment levels increased solidly, whereas stocks declined for the first time in three months as some companies lowered their spending on inputs.
“After riding high in recent months, there were some positive signs that inflation had begun to cool in August,” Owen said.
“Input prices rose at the slowest pace for three months, despite a marked increase in staff costs that was the second-quickest for seven years.”
Supply conditions moved closer to stabilising in August after a sustained period of delays due to the impacts of the pandemic.
On the price front, input cost pressures remained sharp but softened from their recent peak, with output charges slowing to a seven-month low.
Owen said business sentiment picked up to the strongest since February, with respondents often linking growth expectations to hopes of higher new business, contract wins and a stabilising economy following the pandemic.
“Firms indicated that lower commodity prices had helped to ease overall cost pressures, although higher fuel prices and exchange rate fluctuations remained key hindrances,” Owen said.
“On line with softening cost pressures, output charges rose to the least extent since January (but still rapidly), offering some hope that consumer price pressures are starting to ease.”
BUSINESS REPORT