Financial information, analytics and market intelligence company S&P Global’s South Africa Purchasing Manager’s Index (PMI) ended 2025 in its weakest position for the year.

The headline PMI dropped to 47.7 in December, from 49 in November, signalling a moderate and faster decline in operating conditions at South African companies.

Customers rowed back on spending, which led to a sharp reduction in business activity, while firms also curtailed their purchases and input stocks; however, employment edged higher and confidence towards the outlook remained strong.

Business activity decreased sharply over the course of December, with the contraction widespread across the monitored sectors and the most marked since January 2025.

Firms reporting to the survey noted that output had fallen amid challenging economic conditions and weaker client demand, S&P Global reports.

The index had been in contractionary territory throughout the final quarter of the year, while the latest December reading was the weakest seen in 11 months, S&P Global adds.

With firms struggling to win sales, they often turned to existing work to facilitate business activity. This resulted in a solid decrease in total backlogs, with the rate of depletion accelerating to its quickest for more than five years.

Businesses responded to a dampening of operating conditions by reducing their purchasing activity in December, at a rate that was modest in nature but the quickest since March 2025.

Some survey respondents added that overbuying in recent months, as well as resource shortages, led to lower purchasing volumes. This also contributed to a fresh contraction in input stocks over the latest survey period.

December data indicated some relief on inflationary pressures at South African companies, which was typically owing to a further improvement in the rand:dollar exchange rate.

Input costs rose solidly overall, to a lesser extent than in November, but quicker than the mild rates observed in recent months. Businesses responded with a softer increase in output charges.

“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,” says S&P Global Market Intelligence senior economist David Owen.

“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.”

Employment numbers across the private sector rose for the third consecutive month, albeit fractionally.

New work intakes decreased in December for the third month in a row and the downturn was the sharpest recorded since March 2024. A lack of spending from households, pullbacks in business orders and lower sales from international clients were all mentioned by survey respondents.

Notably, total exports decreased month-on-month after a marginal rise in November, S&P says.

Delivery times continued to improve, stretching the record sequence that began in April 2025, although the latest upturn was only marginal. According to respondents, weaker input demand contributed to stronger supply chains, offsetting some reports of shipment delays and input shortages.

For this year, South African firms looked past their current struggles to predict a robust upturn in business activity for the next 12 months. They were hopeful of a pick-up in economic conditions and client sales, while also highlighting new projects as a reason to be confident.

Business optimism was higher than the long-run trend, despite easing slightly from November, the monthly PMI shows.

“Regarding the year ahead, South African firms gave reasons to be confident that the current downturn in business conditions will fade. Survey comments pointed to a positive demand outlook, hopes of reduced headwinds and stronger customer relationships,” says Owen.