Rand slips as markets await October fuel price adjustment

At 08:19, the currency traded at R16.68 to the US dollar, about 0.2% weaker than its previous close.

Market attention is focused on the September S&P Global whole-economy PMI due at 09:15, which is expected to provide further insight into business conditions. A separate manufacturing PMI released recently showed sentiment improved in September after three consecutive months of contraction, supported by a recovery in new orders.

Fuel price hike in focus

Investors and consumers are also awaiting the Department of Petroleum Resources’ monthly fuel-price announcement.

Analysts have warned motorists to brace for a sharp increase, with petrol prices expected to rise by about R3.29/litre and diesel by roughly R3.19/litre.

“The combination of much higher oil prices and the depreciation of the rand have heavily impacted prices, which will now exert further inflationary pressure on the system,” ETM Analytics said in a note.

In the bond market, South Africa’s benchmark 2035 government bond was marginally weaker in early trade, with the yield rising two basis points to 8.88%.

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Private sector slips back into contraction

Meanwhile, South Africa’s private sector contracted in September at its fastest pace since December as weaker demand, supply bottlenecks and rising fuel-related costs weighed on business activity.

The S&P Global South Africa PMI fell to 49.0 in September from 50.5 in August. A reading below the 50-point mark signals contraction.

“The downturn came amid renewed contractions in business activity, new orders and stocks of purchases, as firms often reported a weaker demand environment linked to rising prices and increased economic uncertainty,” said David Owen, principal economist at S&P Global Market Intelligence.

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Demand weakens as customers delay spending

New orders declined at the sharpest rate in two-and-a-half years as customers postponed spending decisions due to uncertainty over fuel prices and both domestic and global economic conditions.

Exports remained a bright spot, however, with foreign business increasing for a fourth consecutive month.

Survey respondents said demand conditions had weakened significantly, resulting in slower activity and reduced purchasing by businesses.

Supply chain pressures intensify

Supply chain disruptions also worsened during the month.

Suppliers’ delivery times lengthened at the fastest pace since February 2024, with companies citing congestion at the Port of Durban, shipping disruptions and shortages of raw materials.

Employment levels were broadly unchanged, although businesses reported a slight reduction in staffing levels.

Inflation pressures remain elevated

Input cost inflation remained strong, driven largely by higher fuel costs, while purchase price inflation accelerated to its highest level in three months.

Faced with rising costs, companies increased selling prices at the fastest pace since June, passing some of the pressure on to customers.

Optimism improves despite current challenges

Despite the weaker September performance, business confidence improved for a third consecutive month and reached its highest level since May.

Companies expressed optimism that easing supply chain constraints and lower fuel prices would support stronger output growth over the next year, even as they navigate current economic headwinds.