SA manufacturing slumps to contractionary terriroty, signalling deepening sector strain

South Africa’s manufacturing sector took a sharp downturn in November, with the seasonally adjusted Absa Purchasing Managers’ Index (PMI) plunging by 7.2 points to 42, its weakest reading in several months and well below the 50-point mark that separates expansion from contraction.

The steep decline was driven by worsening conditions across four of the index’s five major components, with only employment showing a marginal improvement, though it too remained in negative territory.

Absa analysts noted that the PMI reflects actual changes in activity and demand rather than sentiment, making the latest figures a direct signal of renewed strain in the sector.

Overall, Absa said the November PMI underscores the fragile state of South Africa’s manufacturing sector, where domestic demand remains weak, export markets are subdued, and output continues to lag, even as cost pressures begin to ease and some logistical bottlenecks show early signs of improvement.

"The November PMI results highlight the ongoing fragility in South Africa’s manufacturing sector," Absa said.

"A steep deterioration in demand and production overshadowed slight gains in employment and business expectations. Lower cost pressures are a positive, but alone are not sufficient to lift momentum in the absence of demand recovery."

One of the biggest drags came from new sales orders, which fell sharply in November.

Export demand remained subdued, a trend that has persisted since late 2024, meaning the latest drop was largely fuelled by weaker domestic orders.

The slowdown reversed the brief rebound in activity seen during the third quarter of 2025, when the index temporarily rose above the 50-point threshold.

Business activity declined again in October and fell further in November, mirroring the lacklustre performance seen in official manufacturing data.

After shrinking by 0.4% in 2024, the sector is on track for another contraction this year, with output down 1.5% year-to-date, even before fourth-quarter data is included.

Despite the widespread declines, the employment index rose for a second consecutive month, lifting it above the average recorded over the first 10 months of the year.

However, it remained below 50, indicating that job creation is still not keeping pace with overall sector activity.

Manufacturers also continued to operate with exceptionally low inventory levels. The inventories index dropped to 46.1, its lowest point since May, underscoring the thin buffer of raw materials and intermediate goods available for production. Except for July and August, inventory levels have been depressed throughout 2025.

A notable feature of the November print was the sharp decline in the supplier deliveries index. While its fall weighed on the headline PMI, the drop may indicate faster delivery times, a positive development if driven by improvements in logistics.

Some easing at domestic ports was reported during the month, although strong winds in Cape Town caused intermittent disruptions. Given the steep slide in orders, however, the quicker deliveries likely reflect less pressure on suppliers rather than systemic improvements.

In more encouraging news, cost pressures eased. The purchasing price index fell by 7.4 points, supported by a stronger rand and softer international oil prices.

Absa analysts said that the decline could have been even steeper were it not for persistently high diesel prices, which remain closely tied to global petroleum markets. If the downward trend in input costs holds, it may help ease consumer inflation in the broader economy over time.

There was also a slight improvement in forward-looking sentiment. The expected business conditions index ticked up to 50.8, returning to positive territory after two months of pessimism.

However, the reading remains well below the long-term average, reflecting cautious optimism among manufacturers rather than a decisive shift.

BUSINESS REPORT