Business conditions in the private sector deteriorated halfway through the second quarter of the year as companies contended with higher fuel costs, although they still took on extra workers at the highest pace since late 2022, S&P Global said.The headline purchasing managers index (PMI) for South Africa dipped to 49.6 in May from 51.6 in April, falling below the 50.0 neutral mark for the first time in five months, the financial intelligence and analytics company said.May 2026 stats. (Karen Moolman) Central to the decline in business conditions were lower output and new orders, while new business decreased for the third time in the past four months, the most significant drop so far in 2026. New export orders were also down, albeit only slightly.“The war in the Middle East and increases in fuel prices in particular took their toll on the South African private sector in May. Renewed falls in output and new orders were signalled as inflationary pressures strengthened further,” S&P Global Market Intelligence economics director Andrew Harker said.“On a more positive note, firms took on extra staff at the fastest pace since September 2022, but we’ll likely need to see a swift rebound in new orders and business activity if such job creation is to be sustained in the months ahead.”Respondents in the survey said they hired new workers to fill vacant positions and complete projects quicker.Higher fuel costs have also taken a toll on business confidence, with the Bureau for Economic Research (BER)/Rand Merchant Bank index falling eight points to 39 in the second quarter, according to a report on Tuesday. The deterioration was broad-based across sectors.Since the start of April, the retail price of petrol in South Africa has leapt by R7.76 per litre in Gauteng and other inland areas, while the cost of diesel has jumped by between R9.54 and R10.17.According to the BER, the cost of fuel soared by R45bn during the second quarter compared with the first three months of the year. It would have been even higher were it not for the R17bn the Treasury surrendered by slashing the general fuel levy on both petrol and diesel to provide some relief to consumers and businesses.“This is a significant cost to the economy. It’s more than 2% of quarterly GDP spend,” BER chief economist Lisette Ijssel de Schepper told an annual conference on Tuesday.In the S&P Global survey, the impact of higher fuel costs was evident on purchase prices, which increased at a much steeper pace in May. Moreover, the rate of inflation quickened to the fastest since July 2022.South African companies responded to higher input costs by raising their selling prices in tandem, with the pace of inflation hitting a 46-month high. Despite the worsening business environment in May, good pipelines of new work, advertising plans and hopes for stable market conditions supported confidence in the year-ahead outlook for business activity.The S&P Global PMI is compiled from responses to questionnaires sent to purchasing managers from about 400 South African private sector companies. It is a weighted average of new orders, output, employment, suppliers’ delivery times and stocks of purchases.