The private sector economy ended 2025 on a weaker footing, as business activity fell sharply amid subdued client demand and lower new orders. This is according to the latest S&P Global South Africa purchasing managers’ index (PMI) released on Tuesday. In the most substantial downturn in business activity since January 2025, the headline PMI declined to 47.7 in December from 49.0 in November.
The index remained below the neutral 50-point threshold, reflecting persistent pressure on firms as demand and spending waned. S&P Global Market Intelligence senior economist David Owen said: “After a strong couple of quarters, the South African economy experienced damper conditions in the fourth quarter, with business activity declining for three months running. The downturn has been mainly down to a pullback in demand, which deepened in December as customers reacted to an uplift in price pressures in the prior month and broader economic headwinds.” Output fell sharply in December, while new business volumes declined for the third month in a row, with the downturn in new orders the sharpest since March 2024.
Companies cited weaker household spending, reduced business orders, and lower international sales — following a marginal rise in exports in November — as key contributors to the slowdown. With fewer incoming projects, firms worked through existing orders, leading to the fastest depletion of backlogs in over five years. Businesses also scaled back their input purchases at the quickest pace since March, as some panellists noted overbuying earlier in the year and tighter control of inventory levels.
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Owen said firms had responded to weaker demand with caution: “Subsequently, firms showed greater caution towards purchases, recording a fresh reduction in December, as well as a decrease in stock volumes. However, the employment picture was slightly brighter, with the data signalling a slight rise attributed to short-term hires.” Indeed, employment rose for a third consecutive month, though only fractionally, suggesting businesses are retaining staff in anticipation of improved trading conditions. Encouragingly, cost pressures eased slightly from November, supported by a stronger rand.
Input costs rose solidly but at a slower rate, while output price increases moderated as firms limited price hikes to sustain sales. Supplier performance also improved for the ninth straight month, continuing a record streak of shorter delivery times. Despite ending the year in contraction, business confidence remained resilient.
Firms were broadly optimistic about 2026, with many citing expectations of new projects, stronger client sales and an improving economy. “Regarding the year ahead, South African firms gave reasons to be confident that the current downturn in business conditions will fade,” Owen said. “Survey comments pointed to a positive demand outlook, hopes of reduced headwinds and stronger customer relationships.”
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