ThebeMabanga
The South African Reserve Bank’s (SARB) leading indicator was up 4.2% year-on-year in May 2026. The indicator signals business sentiment and activities in the quarter ahead.
The indicator has been rising for the past two years, since April 2024, while the year on year increase for March this year was the highest since October 2021.
The May indicator fell by 0.3% month-on-month after a 2.0% monthly decline in April.
The May indicator showed a mixed bag with half of the sub-indices making a positive contribution and half having a negative impact.
The largest positive contributors were accelerations in the six-month smoothed growth rates in the real M1 money supply and the number of new passenger vehicles sold.
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New vehicle sales rose by 15.3% year on year in June. This followed a 12.8% year on year gain in May. The June sales were the best June since 2007, a full year before the Global Financial Crisis.
The Automotive Business Council (Naamsa) expects 2026 sales to be between 9% and 11% higher than 2025. In the first half of 2026, sales were up 12.9% year-on-year.
The other positive factors were an increase in the volume of domestic orders received in the manufacturing sector, as well as an acceleration in the six-month smoothed growth rate in job advertisements.
Last, but not least, the percentage change over 12 months of the composite leading business cycle indicator for South Africa’s major trading-partner countries had a positive impact.
The largest negative contributors were a deterioration in the RMB/BER Business Confidence Index (BCI) and a decrease in the number of residential building plans approved.
The BCI slipped to 39 in the second quarter 2026 from 47 in the first quarter 2026. It is now back to the level it reached in third quarter 2025.
The US dollar-based commodity price index for South Africa’s main export commodities had a negative impact.
Manufacturing also had a negative contribution as the average hours worked per factory worker in manufacturing
The interest rate spread between the 10-year government bonds and the 91-day Treasury bills also had a negative impact as it widened, which suggests a likely increase in interest rates, or fall in bond yields.
The composite coincident business cycle indicator, which measures a cluster of indicators, fell by 0.4% month-on-month in April and was down 0.9% year-on-year. This was due to decreases in the real value of wholesale, retail and motor trade sales and the industrial production index.
