South Africa’s manufacturing activity slumps again in November as cost pressures rise

South Africa’s private sector recorded another month of deteriorating business conditions in November, with the S&P Global South Africa Purchasing Managers’ Index (PMI) slipping to 49.0, signalling a second consecutive monthly contraction.

Although slightly better than October’s reading of 48.8, the second consecutive month of decline highlights a subdued end to 2025 for the economy. 

The S&P PMI corresponds with the seasonally adjusted Absa PMI released earlier this week, which showed that sentiment plunged by 7.2 points to 42, its weakest reading in several months and well below the 50-point mark that separates expansion from contraction.

According to the S&P survey data collected between November 12–26, firms continued to grapple with reduced output and a shortage of new business, particularly in domestic markets.

Activity levels dropped at the fastest rate in eight months, with companies citing persistently challenging economic conditions and too few new projects to replace completed work.

Despite a modest rise in international sales, overall new orders remained in decline as manufacturers and construction firms reported ongoing weakness.

In contrast, the services, wholesale, and retail sectors showed pockets of stronger demand, though not enough to offset broader softness.

A major concern for businesses in November was the sharp escalation in input costs. Firms experienced their fastest increase in input price inflation in more than a year, driven by higher purchase prices and rising wage costs.

As a result, companies raised selling prices at the quickest pace since February, suggesting they are struggling to absorb cost pressures.

Supplier delivery times improved for the eighth straight month, though the pace of improvement slowed from October’s record level. Companies attributed this to a mix of improved supplier capacity amid weaker demand, tempered by material shortages, shipping delays, and courier backlogs.

Employment levels offered a rare bright spot: firms increased staffing for the second month, albeit at a slower pace than in October. Businesses also kept purchasing activity broadly unchanged after cutting back the month before.

Despite the ongoing pressures, business confidence strengthened in November, reaching its highest level in a year. Nearly half of surveyed firms expect output to rise in 2026, citing new business opportunities and improved broader economic prospects.

David Owen, senior economist at S&P Global Market Intelligence, said the data suggests a softer fourth quarter for South Africa, but not necessarily a severe downturn.

"The October and November PMIs suggest that Q4 may be a softer one for the South African economy, particularly if December figures also come below-par,"Owen said.

"That said, after seeing improving business conditionsthroughout the middle of the year, the recent data mayonly reflect a modest cooling-off."

He warned, however, that sustained price pressures could weigh on margins and dampen customer demand heading into the new year.

"The risk will be whether the uptick in price pressures observed in November is sustained, a factor that could hit business margins and customer demand. Firms raised their selling prices at the fastest rate in nine months, which signalled only a limited ability to absorb cost burdens," Owen said.

"On a positive note, businesses showed greater confidence towards future activity in November, with optimism rising for the second consecutive month from a more than four-year low in September. Firms also hired more staff in spite of the drop in sales, putting them in a good position to raise output should order book volumes recover."

BUSINESS REPORT