As reported by reuters.com on October 5, South Africa’s private sector shrank at its fastest pace since December due to a steep decline in new orders alongside growing supply bottlenecks and fuel-driven cost pressures. Dropping below the 50-mark dividing growth from contraction, the S&P Global South Africa Purchasing Managers’ Index (PMI) registered 49.0 in September, down from August’s 50.5.
Port Congestion and Fuel Hikes Stifle Manufacturing Output
“The downturn came amid renewed contractions in business activity, new orders and stocks of purchases, as firms often reported a weaker demand environment linked to rising prices and increased economic uncertainty,” said David Owen, Principal Economist at S&P Global Market Intelligence, as reported by reuters.com. Amid uncertainty regarding fuel prices and broader economic conditions both at home and abroad, customers held back on spending, causing new orders to fall at their fastest pace in thirty months.
Supply chain pressures intensified as suppliers’ delivery times lengthened to the greatest extent since February 2024. Respondents pointed to congestion at the Port of Durban, shipping disruptions, and material shortages. Fueled primarily by rising fuel prices, input cost inflation stayed strong, while purchase price inflation rose to a three-month peak. Companies raised selling prices at the fastest pace since June.
Contrasting PMI Metrics Reflect Divergent Sector Views
While the S&P Global PMI signaled contraction at 49.0, alternative surveys presented a more optimistic picture for specific segments of the economy. Business Day reported that the seasonally adjusted Absa Purchasing Managers’ Index (PMI)—sponsored by Absa and compiled by the Bureau for Economic Research (BER)—rose to 50.7 in September from 45.8 in the previous month, returning to positive territory for the first time since May.
The Absa-sponsored survey indicated that new sales orders climbed to 50.8 from 40.3, while the business activity index recovered to 49.3 after falling to 40.2 in August. However, Absa and the BER noted that actual business activity remained just below the neutral 50 mark, employment weakened, and order backlogs stayed subdued. The divergence highlights differing methodologies and sample focuses between the broader S&P Global private sector survey and the manufacturing-focused Absa index.
Fuel Price Increases Add Heavy Input Burdens
Producers faced severe cost escalation at the start of September due to sharp increases in domestic fuel prices. Business Day reported that the Department of Mineral and Petroleum Resources raised the pump price of 95-grade petrol by R1.34 to R26.92 per litre in the economic hub of Gauteng. Simultaneously, the wholesale cost of diesel jumped by R2.95 for 0.05% sulphur grade and R3.15 for 0.005% sulphur grade, reaching R29.11 per litre.
These energy adjustments compounded existing financial strains on manufacturers, whose sector output declined by 1.8% and contributed to a broader 0.2% economic contraction in the second quarter, according to data published by Stats SA cited by Business Day. Short-term borrowing costs remained a constraint, with the metric rising by seven points quarter-on-quarter to 43 in the third quarter.
Business Expectations Rise Despite Persistent Supply Headwinds
Despite immediate operational hurdles, business expectations improved across multiple surveys. reuters.com noted that business expectations reached their highest level since May, supported by firm hopes that easing supply problems and lower fuel prices would boost output growth over the coming year. Similarly, the Absa-sponsored PMI showed that the index tracking expected business conditions in six months’ time edged up to 55.3 from 54.7, reflecting cautious optimism among purchasing managers.
Fuel Price Increases Affect South African Manufacturers
What specific fuel price increases affected South African manufacturers in September?
The Department of Mineral and Petroleum Resources raised the pump price of 95-grade petrol by R1.34 to R26.92 per litre in Gauteng. Diesel wholesale costs jumped by R2.95 for 0.05% sulphur grade and R3.15 for 0.005% sulphur grade, bringing the wholesale price to R29.11 per litre.
Why did the supplier deliveries index remain elevated during September?
Absa and the Bureau for Economic Research reported that the high supplier deliveries reading reflected actual delivery delays caused by shipping disruptions, container clearing delays, and severe congestion at the Port of Durban, rather than stronger demand for goods.
How did export business perform during the September downturn?
Export business bucked the broader contraction trend, rising for a fourth straight month according to survey data reported by reuters.com.
Worth a look