The Standard Bank Purchasing Managers’ Index (PMI) indicates that business conditions in the private sector improved in June, signalling an improvement in the health of the sector, following stagnation in May.

“Business conditions strengthened at the fastest rate for three months, though the pace remained modest overall,” states the index.

The headline Standard Bank PMI is a composite single-figure indicator of changes in the private sector business conditions. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50 indicates overall improvement in conditions.

The survey incorporates input from about 400 private sector companies in industries including mining, manufacturing, services, construction and retail.

Contributing factors to the 0.9 index point increase, from the 50-point mark to 50.9 in June, are stronger growth in new orders amid greater demand. As a result, business activity rebounded, entering expansionary territory for the first time in the second quarter. Job creation also continued in June.

On the price front, overall input costs continued to increase amid higher fuel prices. Data also suggested that rising purchase costs and staff pay were contributors to the overall increase. Input cost inflation was marked, having accelerated from May.

As a result, output prices rose further in June, continuing the trend observed since the survey began in July 2011. “As was the case with cost burdens, average selling charges rose to a greater extent than that observed in May. That said, the rate of output price inflation remained slower than that observed for input costs,” said Standard Bank.

Standard Bank economist Thanda Sithole comments the improvement in business conditions measured for June is in line with the company’s view that the PMI will, for the remainder of 2018, largely show signs of improving domestic business conditions, that are influenced by domestic consumption expenditure and reasonable global growth.

“Nonetheless, we will monitor the risks associated with elevated international oil prices, a continued domestic currency weakness, the ongoing debate on land, and the continued global trade concerns.”

Sithole added that Standard Bank’s economic prognosis for gross domestic product growth is 1.7% for 2018 and 2.2% for 2019.