The S&P Global South Africa Purchasing Managers’ Index (PMI) for August showed that cost pressures eased for South African businesses, which helped to sustain the expansion in overall operating conditions, while output also improved for the first time in three months, and inventories increased.

However, there was a decline in employment and a weakening of sales growth, financial intelligence and credit ratings company S&P says.

The August headline index was above the 50 point threshold for the fourth consecutive month, but, at 50.1, it was down from 50.3 in July.

The index signalled only a fractional improvement in business conditions from the month before, S&P notes.

“The easing of cost pressures for South African businesses is a positive sign for the private sector economy, suggesting that the acceleration seen in June and July may be temporary. Firms reported that the gradual improvement in exchange rates has begun to alleviate cost burdens on imported items, although rising prices for fuel and food remain a concern,” says S&P Global Market Intelligence senior economist David Owen.

“The latest data offers some hope that official CPI inflation may soften in August after reaching a ten-month high of 3.5% in July,” he says.

For the first time since May, companies in South Africa reported an increase in output levels during August. The upturn was modest, but was the second-quickest in two years, after the PMI reading in May.

Generally, firms in the survey panel attributed the increase in output to improving demand and the initiation of new projects.

Further, order book volumes increased in August, although the pace of growth was lower than in July.

Some firms reported securing new customers, while others highlighted low work levels and challenging trading conditions, particularly with US clients owing to higher tariffs, S&P says.

“Growth seemed to be primarily driven by domestic demand, as order book intakes from abroad fell for the fifth consecutive month.”

Activity levels were partly supported by a moderation in input cost inflation. Notably, the latest data indicated that costs rose at the weakest rate in the current ten-month sequence of increases, S&P notes.

Respondents to the survey highlighted that the slight improvement in the rand's value against the dollar was a key factor, as import costs for several items were reported to be falling.

However, there were some mentions of rising prices for inputs, such as fuel and food. Wage pressures also eased, with businesses reporting the softest increase in three months.

Firms generally chose to pass on cost increases to their customers by raising output prices. The inflation trend was largely unchanged from the previous two survey periods, although it remained weaker than the series average, S&P adds.

“August data signalled increased efforts by South African businesses to enhance their procurement of inputs. Purchase levels rose for the fourth time in five months and at the strongest pace since October 2024. This led to a slight uplift in inventories.”

In contrast, after two consecutive months of employment growth, job numbers fell slightly in August, as several firms opted not to replace departing staff, S&P says.

Meanwhile, supply chains improved again in August, reflecting an ongoing recovery in vendor performance after domestic port delays caused disruptions last year.

This upturn in performance marked the fifth consecutive month of improvement, which is the longest run in the index's history.

Additionally, South African firms remained highly confident about their future output in August, although the degree of optimism declined marginally. They generally perceived market conditions as moving in a positive direction, with upbeat sales forecasts.

However, some firms expressed uncertainty about their growth prospects, citing potential impacts from US tariffs on trade performance.

“The overall growth picture remains tepid. The PMI stood at 50.1 in August, just above the 50 no-change mark for the fourth consecutive month,” says Owen.

“While output and new orders increased, with output increasing for the first time since May, sales growth was only marginal and tempered by lower export volumes,” he notes.

“There was also reduced appetite for replacing staff, resulting in a renewed decline in employment. Outstanding business fell for the twelfth consecutive month, suggesting that demand pipelines remain weak. However, business sentiment remained strongly positive, indicating that firms are still hopeful for an upward shift in market conditions.”