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The Citizen
14-05-2025
- Business
- The Citizen
Economic activity slows in April as economy struggles
Although the South African economy is muddling along, there is some hope thanks to low inflation, low fuel prices and a strong rand. Economic activity has slowed in April as the economy struggles with downside risks, such as the United States' (US) punitive import tariffs, plummeting markets and sharply lower forecasts for global economic growth. According to the BankservAfrica Economic Transactions Index (BETI), that measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices, economic activity slipped in April. 'The BETI reached its lowest level of the year of 136.4 in April, down by 0.6% on the 137.2 recorded in March,' Shergeran Naidoo, BankservAfrica's head of stakeholder engagements, says. Although the BETI is still 1.5% higher than a year ago, the slowdown reflects the impact of April's announcement of U.S. punitive import tariffs, which marked the beginning of a developing trade war leading to daily volatility, plummeting markets and slashed global growth forecasts. Elize Kruger, an independent economist, says confidence levels across the globe and in South Africa have been knocked by the sheer uncertainty that these developments brought on. 'Low confidence and uncertainty are detrimental to economic activity, as investors and households hold back on spending decisions until there is more clarity.' ALSO READ: Economic activity in SA struggling to gain momentum Good news for local economy despite global setbacks However, despite global setbacks, positive factors are expected to support economic activity in 2025, she says. 'While the overall effect of global developments is negative for the South African economy, prompting a downward revision of 2025 growth forecasts by around 0.5 percentage points, several offsetting factors are offering some relief. 'The global downturn is expected to dampen commodity demand and prices, but lower international oil prices are easing inflation pressures, and rising gold prices may help counter export losses. Many South African export commodities also remain exempt from US tariffs, providing potential support for the mining sector and broader economy.' Kruger points out that other economic indicators were mixed in April, sending conflicting signals about the strength of the economy. The S&P Global South Africa Purchasing Managers' Index rose to 50.0 in April, increasing from 48.3 in March, after four months in negative territory. ALSO READ: SA's economic growth outlook growing increasingly dim Manufacturing is struggling, but car sales are recovering Meanwhile, the seasonally adjusted Absa Purchasing Managers' Index (PMI) remained in contractionary territory for a sixth consecutive month. Data from Statistics SA also recently confirmed that the manufacturing sector has entered a technical recession with two consecutive quarterly contractions. However, encouragingly, Naamsa figures revealed that the strong performance in the vehicle sales market continued in April 2025. 'All indicators point to the likelihood that, after several false starts, full-year vehicle sales in 2025 will finally return to pre-Covid levels, reflecting an improvement in household budgets due to lower inflation and interest rates,' Kruger says. ALSO READ: Increased unemployment rate red flag for weak economic growth Pockets of excellence in local economy will help economic activity 'With some pockets of excellence in the South African economy, such as in the renewable energy, automotive and financial sectors and positive developments relating to the de-escalation of the global trade war in recent days, such as the trade deals between the US and UK and China, the South African economy can regain momentum in the second half of the year.' Kruger says the launch of the second phase of Operation Vulindlela is also a positive development, confirming government's commitment to push forward on much-needed structural reforms. After reaching an all-time high in March, the number of transactions cleared through BankservAfrica in April 2025 subsided to 167.9 million compared to 172.4 million in March, but it was still 7% up on a year ago. The standardised nominal value of transactions eased off to R1.320 trillion in April compared to R1.365 trillion in March 2025, with the average value per transaction tracked in the BETI continuing on its downward trend to R7 482. ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert Structural tailwinds will push up economic activity Kruger says some structural tailwinds should continue to push economic activity higher on the local front in 2025 despite global developments. With inflation currently at 2.7%, below the South African Reserve Bank (Sarb) 3-6% target band, there is significant room to cut interest rates from the current repo rate level of 7.5% by at least 50 basis points. 'Real interest rates are simply unnecessarily punitive for an economy muddling along, unable to gain meaningful momentum,' she says. At 4.3%, the average real repo rate remains highly restrictive, especially when compared to the neutral level of 2.7%. Meanwhile, the rand has regained nearly all its post-US Liberation Day losses, helped by some weakness in the US dollar and is trading at fairly strong levels, Kruger says. 'The low inflation rate will also play a key role in supporting the recovery of salary earners' purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real salary increases, which should boost consumer spending.'
TimesLIVE
07-05-2025
- Business
- TimesLIVE
SA business activity stabilises as PMI hits neutral mark
The private sector showed signs of stabilisation in April, emerging from a four-month downturn as sales picked up slightly and supply chains strengthened, a survey showed on Tuesday. The S&P Global South Africa Purchasing Managers' Index (PMI) rose to 50.0 in April, up from 48.3 in March. A PMI reading above 50 indicates growth, while below 50 points to a contraction. This marks the first time since November 2024 that the index has reached the neutral mark, signalling a mild recovery in business conditions. New orders, output and employment all moved into growth territory, albeit at a modest pace. New orders increased for the first time in five months, driven by larger client orders and successful marketing campaigns, though economic uncertainty continued to weigh on customer spending. Supply chains improved notably, with suppliers' delivery times shortening for the first time since June 2023, aided by eased port congestion at Durban. This led to a modest rise in purchasing activity, the first in four months, as firms sought to replenish their inventories. However, input price pressures intensified sharply, reaching an eight-month high, largely due to a weakening rand against the US dollar. "Volatility in the rand, specially during the first half of April, made its mark on prices," said David Owen, senior economist at S&P Global Market Intelligence.
Reuters
06-05-2025
- Business
- Reuters
South African business activity stabilises as PMI hits neutral mark
JOHANNESBURG, May 6 (Reuters) - South Africa's private sector showed signs of stabilisation in April, emerging from a four-month downturn as sales picked up slightly and supply chains strengthened, a survey showed on Tuesday. The S&P Global South Africa Purchasing Managers' Index (PMI) rose to 50.0 in April, up from 48.3 in March. A PMI reading above 50 indicates growth, while below 50 points to a contraction. This marks the first time since November 2024 that the index has reached the neutral mark, signalling a mild recovery in business conditions. New orders, output and employment all moved into growth territory, albeit at a modest pace. New orders increased for the first time in five months, driven by larger client orders and successful marketing campaigns, although economic uncertainty continued to weigh on customer spending. Supply chains improved notably, with suppliers' delivery times shortening for the first time since June 2023, aided by eased port congestion at Durban. This led to a modest rise in purchasing activity, the first in four months, as firms sought to replenish their inventories. However, input price pressures intensified sharply, reaching an eight-month high, largely due to a weakening rand against the U.S. dollar. "Volatility in the rand especially during the first half of April made its mark on prices," said David Owen, senior economist at S&P Global Market Intelligence. Despite the better trends in activity, optimism for the year ahead dipped, with firms expressing concerns over domestic and international politics, Owen added.
Reuters
03-04-2025
- Business
- Reuters
South Africa business activity contracts for fourth month in a row
JOHANNESBURG, April 3 (Reuters) - South Africa's private sector shrank in March for the fourth consecutive month, as output and sales declined amid economic uncertainty, a survey showed on Thursday. The S&P Global South Africa Purchasing Managers' Index (PMI) fell to 48.3 in March from 49.0 in February, remaining below the 50.0 threshold that separates growth from contraction. This was the second-lowest reading since July 2023, indicating ongoing challenges in the business environment. Output volumes decreased steadily, with firms attributing the decline to lower new orders, contract completions, and weaker consumer spending. New order volumes fell sharply, driven by economic and political uncertainties, although there was a slight uptick in international demand, particularly from African countries. "The March PMI figures confirmed a full quarter of declining business conditions in the South African private sector," said David Owen, senior economist at S&P Global Market Intelligence. "Demand levels continued to fall in March, with some panellists blaming the uncertain outlook on domestic fiscal policy and global trade, which has contributed to a waning of business confidence and a drop in customer spending," Owen said. On a positive note, cost pressures eased, with input price inflation reaching a five-month low. The rand's improved exchange rate helped mitigate supplier cost increases, leading to a marginal decline in selling prices for the first time since October 2024.
