South Africa’s private sector economy continued its upward trajectory in July, marking a third consecutive month of expansion, according to the latest S&P Global South Africa Purchasing Managers’ Index (PMI). The index registered a reading of 50.3 in July, marginally higher than June’s 50.1, signifying a slight yet notable improvement in business activity across key sectors.
The headline figure was supported predominantly by a rebound in new business volumes and sustained employment growth. Domestic demand exhibited resilience, particularly within the services and wholesale and retail segments, reversing the dip observed in June. However, external demand remained weak, with new export orders declining for the fourth consecutive month—underscoring persistent challenges in international trade conditions.
Employment indicators were more robust. The pace of job creation reached its highest level since May 2024, underpinned by both permanent appointments and short-term staffing. This expansion in workforce capacity facilitated a reduction in backlogs, with July recording the swiftest decline in outstanding business since February 2025.
Nevertheless, the month saw a pronounced increase in input costs. Rising wage demands and fuel expenses contributed to heightened input inflation. Wage growth accelerated for the third straight month, reflecting tighter labour market conditions and adjustments for cost-of-living pressures. Similarly, purchasing costs surged due to elevated supplier charges and volatile fuel prices.
In response, many firms passed a portion of these increased costs to consumers, leading to a modest rise in output prices. Despite these inflationary pressures, business sentiment regarding future activity strengthened, reaching its highest level since January 2025. Approximately 41% of surveyed firms anticipated higher output over the next twelve months, although this optimism remains below the levels recorded in 2024.
Broader economic conditions continue to temper confidence. South Africa now faces a 30% tariff on exports to the United States, following its inability to secure a revised trade arrangement ahead of a deadline set by U.S. President Donald Trump. The imposition of these tariffs is expected to have significant repercussions for the export-oriented sectors, with preliminary estimates indicating the potential loss of tens of thousands of jobs. The South African government has indicated plans to implement support mechanisms for affected exporters, though the scope and timing of these interventions remain under deliberation.
While domestic market dynamics provide a degree of stability, persistent cost inflation, exchange rate volatility, and deteriorating trade relations highlight the fragility of the current recovery. Analysts suggest that without strategic fiscal and monetary responses, coupled with more favourable international trade developments, the scope for sustainable growth in the private sector remains limited.
