South African business activity grew at its fastest pace in four years in May, driven by a robust increase in private sector output and improved customer confidence, a survey showed on Wednesday.

The S&P Global South Africa Purchasing Managers’ Index (PMI) rose to 50.8 in May from 50.0 in April, indicating growth for the first time since November 2024. A PMI reading above 50 indicates growth, while below 50 points to a contraction.

The index showed a marginal improvement in the private sector's health, with companies reporting increases in output, new orders and inventories.

The output subindex reached its highest level since May 2021 as firms sought to recover from a first-quarter downturn, buoyed by new projects and rising domestic orders.

Despite the positive domestic outlook, export orders continued to decline, albeit at a slower pace than in April, partly due to US tariffs impacting foreign trade.

However, improved supply chain conditions, including shorter delivery times, enabled firms to boost inventories at the fastest rate in a year.

"The May PMI results added to signs of a strong second-quarter performance across the private sector economy. Businesses appear to be recovering sales after a lacklustre Q1, supporting rising activity and greater purchases," said David Owen, senior economist at S&P Global Market Intelligence.

While input price inflation slowed, allowing firms to reduce selling prices for the second time in three months, staffing levels were cut slightly as companies cited restructuring and unfilled vacancies.

Nonetheless, optimism about future output rose to a three-month high, driven by expectations of increased client demand and new product launches.