South African Private Sector Contracts In May

(RTTNews) - South Africa's private sector logged a marginal downturn in May, led by renewed falls in output and new orders amid inflationary pressures caused by the Middle East war, survey results from S&P Global showed Wednesday.

The purchasing managers' index for the private sector economy dropped to 49.6 in May from 51.6 in April. A score above 50.0 indicates expansion, while any reading below 50 suggests contraction.

New orders declined at the fastest pace in this year so far, and new export orders also dropped, though marginally. The weaker demand in May was attributed to the uncertainty caused by the war in the Middle East and rising fuel prices, which had deterred customers from committing to new projects.

A marginal and renewed fall in output was also due to higher fuel prices along with stormy weather. As a result, input price inflation accelerated to the highest level since July 2022, and selling price inflation was the strongest in 46 months.

Meanwhile, companies added workforce numbers in May, with the rate of job creation rising to the fastest since September 2022 in order to fill vacant positions and complete projects more quickly. Nonetheless, they reduced purchasing activity, indicating reluctance to purchase and hold inputs at a time of falling demand.

Supply chain disruptions continued to persist in the South African private sector, with the latest deterioration in suppliers' delivery times linked to higher fuel costs and shipping delays.