South African private sector confidence sank to its lowest level in four-and-a-half years in February, even as overall business conditions remained broadly stable, according to a Purchasing Managers’ Index survey released on Wednesday by S&P Global.
The headline South Africa PMI held steady at 50.0 for a second consecutive month, signalling unchanged operating conditions compared with January. While the reading marked an improvement from the contraction recorded in the final quarter of 2025, it also underscored a lack of forward momentum in the economy at the start of the year.
A PMI reading above 50 indicates expansion, while below that threshold signals contraction. February’s print suggests that activity is stabilising after last year’s weakness, but underlying demand conditions remain fragile.
Sales soften as firms run down backlogs
Survey respondents reported that output was broadly unchanged in February, supported in part by efforts to complete outstanding work. However, total sales volumes declined, marking the fourth drop in new business over the past five months.
Companies responded by drawing down backlogs at a solid pace, with outstanding work falling faster than the long-run trend for a fifth straight month. The reduction in order pipelines points to softer activity ahead and has weighed heavily on business sentiment.
Expectations for output over the next 12 months slipped to their weakest level since July 2021.
“Private sector conditions remained steady in February, as domestic companies indicated that they had secured enough work to keep business activity ticking along smoothly,” said David Owen, Senior Economist at S&P Global Market Intelligence.
Subdued price pressures offer some relief
Despite the softer demand environment, inflationary pressures remained contained. Firms reported relatively muted input cost increases, which panellists largely attributed to an improving exchange rate against the US dollar and lower fuel prices.
Although wage inflation accelerated to a seven-month high, overall cost burdens were modest enough to allow companies to reduce selling prices for the first time since May 2025. The renewed discounting could provide some support to customer demand in the months ahead.
Owen noted that several economic fundamentals may help rebuild confidence. “Soft inflation, helped by a strong rand, continued to keep cost pressures at bay in February,” he said. “This led to a fresh fall in selling prices that could support an uplift in customer spending. In addition, domestic interest rates are expected to trend downwards in 2026, while the recent ruling on US tariffs should bring some relief to exporters.”
Employment levels rose modestly in February following a slight decline in January, signalling that firms are not yet embarking on aggressive cost-cutting. However, inventory holdings fell for a third consecutive month, reflecting caution over future demand.
Overall, the survey paints a picture of an economy that has steadied after late-2025 weakness but lacks a clear growth catalyst.
With confidence at a multi-year low and order books thinning, the durability of South Africa’s fragile stabilisation may hinge on a sustained recovery in domestic demand and supportive macroeconomic conditions.
