South Africa: Conditions improve at slightly stronger pace in May
June 3, 2022
The S&P Global Purchasing Managers’ Index (PMI) rose to 50.7 in May, up from April’s four-month low of 50.3. Consequently, the index moved further above the 50.0 no-change mark, pointing to a marginally stronger improvement in business conditions from the previous month.
May’s upturn was driven by increased output and higher numbers of new orders. Improving conditions in the KwaZulu-Natal province—the second-largest contributor to national GDP—following devastating floods in April, led to an increase in sales. That said, the improvement was capped by loadshedding, ongoing supply disruptions and weaker exports. With regard to prices, a weaker rand and higher raw material and fuel prices led to higher input costs. Further, companies raised wages in bids to preserve their employees’ purchasing power amid high inflation, which, coupled with rising employment levels, translated into higher staff costs in turn. Consequently, output charges were also raised. More positively, a mild improvement in supply chain performance was noted in the month, although material shortages and shipping delays continued. Lastly, business sentiment fell to its weakest level in nearly a year. While firms remained optimistic regarding the coming 12-month period, concerns over high inflation dampened sentiment.
Author: Marta Casanovas , Economist