Business activity falls, PMI shows

• Decline in activity trends in May is the third consecutive one and among the steepest since July 2021

Business in SA suffered another setback in May as persistent power cuts constrained output and added to a fall in new business activity, according to the latest S&P Global SA PMI.

Business in SA suffered another setback in May as power cuts constrained output and added to a fall in new business activity, according to the latest S&P Global SA purchasing managers’ index (PMI).

Meanwhile, higher inflation is deterring consumer spending, leading to lower demand, while companies try to contend with greater operating costs partly because of the weaker rand and their investment in alternative energy.

This resulted in the S&P Global SA PMI — which tracks business trends across the private sector, including mining, manufacturing, services, construction and retail — falling by 1.7 points month on month from 49.6 to 47.9 in May, more than the forecast drop of 0.3 points.

The third successive decline was the lowest reading in almost two years and one of the steepest since July 2021, when unrest and looting hit many businesses.

“After a promising, albeit slight, uplift in new business during April, customer demand was back in negative territory, adding to a steep and accelerated drop in output,” S&P Global market intelligence senior economist David Owen said.

“On a positive note, supply chain problems are eroding quickly as global shipping delays dissipate and import goods sources come back online,” Owen said.

“Our survey data signalled that supplier delays were at their lowest since December 2019, which should at least help to soften price pressures arising from material and vendor costs,” he said.

The bleak energy outlook looks set to continue this winter as demand for power increases, while companies spend more to run generators and invest in alternative energy to reduce their reliance on troubled stateowned power utility Eskom. This is likely to result in more price hikes, which, with high inflation, is likely to dampen consumer spending and business activity further.

“Despite these challenges, SA businesses remained optimistic about the year-ahead outlook in May, with hopes often placed on expectations of improved demand and business expansion. Over 44% of surveyed firms expect output to grow,” S&P said.

This comes as most reported that the improving import supply helped to ease supply-side challenges.