South African firms saw a further decline in business conditions in November, signalling a weak end to 2025 after the contraction in October.

Output and new orders decreased for a second month running in November and input price inflation quickened.

Activity levels in November deteriorated owing to a drop in new business, while firms faced increased pressure from a sharp rise in input costs, says financial and market intelligence company S&P Global in its South Africa Purchasing Managers’ Index for November.

Despite these challenges, the business expectations outlook improved to a 12-month high, with firms forecasting the strongest improvement in activity for a year, the report notes.

The South Africa PMI was at 49 index points in November, which signals a deterioration in private sector business conditions for the second consecutive month. The pace of decline was marginal and slowed slightly from the 48.8 recorded in October.

The PMI was below the 50-point mark for the month owing to sustained falls in output and new business volumes.

Contractions of similar magnitude to October’s reading were observed, as firms reduced activity amid persistent challenging economic conditions and a shortage of new orders and projects to replace completed work.

Additionally, although the decline in output was modest, it marked the fastest downturn in eight months.

Further, despite a renewed increase in international sales, total new business levels declined as firms reported difficult domestic conditions.

However, there were mixed performances across sectors, with reductions in industry and construction contrasting with better demand in services and wholesale and retail.

Business conditions worsened in November amid a sharp pick-up in price pressures. The survey indicated that firms faced their fastest rise in input costs for over a year, following a period of relatively subdued cost burdens in recent months.

Both purchase prices and wage costs increased more rapidly than in October, prompting firms to raise their output charges to the greatest extent since February.

“The October and November PMIs suggest that the fourth quarter may be a softer one for the South African economy, particularly if December figures also come in below-par.

“However, following improved business conditions throughout the middle of the year, the recent data may only reflect a modest cooling-off,” says S&P Global Market Intelligence senior economist David Owen.

The risk will be whether the uptick in price pressures observed in November is sustained, which is a factor that could hit business margins and customer demand. Firms raised their selling prices at the fastest rate in nine months, which signalled only a limited ability to absorb cost burdens, he adds.

“On a positive note, businesses showed greater confidence towards future activity in November, with optimism rising for the second consecutive month from a more than four-year low in September.”

Firms also hired more staff in November despite the drop in sales, putting them in a good position to raise output should order book volumes recover, he says.

Delivery times continued their record streak of improvement in November, and marked the eighth successive month of stronger vendor performance, but, after hitting a survey record in October, the rate at which lead times shortened was less pronounced and was only marginal.

Further, while some respondents noted increased supplier capacity owing to weaker demand and better vendor relations, these gains were partly offset by reports of material shortages, shipping disruptions and courier backlogs.

South African firms reported another increase in staff numbers in November, although the rate of growth eased from the previous month and was only slight.

Similarly, they signalled little change in their purchases of inputs, which was nonetheless an improvement from October when a decline had been recorded.

Further, domestic companies appeared more optimistic about the activity outlook in November, with expectations of output growth reaching their highest level in 12 months.

Nearly half of the survey panel, or 46%, forecast an increase in activity over the forthcoming year, often citing new business opportunities and improved prospects for both the broader economy and market share expansion.