Absa said the improvement was driven by stronger business activity and a sharp recovery in new sales orders, pointing to firmer near-term demand.
Image: Simphiwe Mbokazi/Independent Newspapers
South Africa’s manufacturing sector showed tentative signs of recovery in April, with the Absa Purchasing Managers’ Index (PMI) rising back into expansionary territory for the first time in seven months since last September.
The index climbed to 52.6 in April from 49 in March, moving above the neutral 50-point mark that separates contraction from growth, according to the latest survey compiled by the Bureau for Economic Research (BER) and sponsored by Absa.
Absa said the improvement was driven by stronger business activity and a sharp recovery in new sales orders, pointing to firmer near-term demand.
"However, some of this strength may reflect the front-loading of orders ahead of expected price increases, raising questions about the sustainability of the recovery," Absa noted.
The rebound was driven by stronger business activity and a sharp rise in new sales orders, suggesting a more positive start to the second quarter after a weak opening to the year.
Production levels increased for a second consecutive month, reflecting improved domestic demand conditions.
However, Absa cautioned that the recovery may not be entirely sustainable. Much of the improvement appears to be linked to companies bringing forward orders ahead of anticipated price increases, raising the risk of softer demand in the months ahead.
The data also highlights an uneven recovery. While domestic demand strengthened, export sales declined, pointing to ongoing vulnerability to global economic headwinds and logistics disruptions.
Encouragingly, the inventories index rose above the 50-point mark for the first time since August 2025, indicating increased stock-building by firms. But this too may reflect precautionary buying rather than a sustained uplift in underlying demand.
Cost pressures remain a significant concern for manufacturers. The purchasing price index surged to 85.6 in April, following a record increase in March, driven by higher oil-linked input costs and a weaker exchange rate. These elevated costs are expected to squeeze profit margins and could limit the durability of the current recovery.
Despite improved activity, employment in the sector remains under pressure. The jobs index stayed in contractionary territory, indicating that firms are still hesitant to expand their workforce amid uncertainty about the outlook.
Business confidence, while slightly improved, also remains subdued. The index tracking expected conditions is still below the neutral level, suggesting that purchasing managers are cautious about the sustainability of the rebound.
Additional pressures stem from ongoing supply chain challenges, including delays linked to global shipping disruptions and inefficiencies at local ports, which continue to affect supplier delivery times.
While the extension of fuel levy relief may provide some short-term support by easing input cost pressures, the broader picture remains fragile.
Absa said the April PMI results suggest that the manufacturing sector has made a stronger start to the second quarter, with activity and demand rebounding after a weak first quarter.
"However, the improvement appears to be driven in part by temporary factors such as front-loaded demand and precautionary stock-building," it said.
Investec economist Lara Hodes noted that though the PMI improved in April, outlook remains lacklustre. Hodes said oil prices have surged to over $100 per barrel, adding upside inflationary pressure and weighing on manufacturers’ profitability.
"The employment index remained subdued at 43.8 (from 43.3 previously). Specifically, uncertainty around the global predicament and performance of the South African economy continues to deter the hiring of new employees," Hodes said.
BUSINESS REPORT