Business Report Economy

SA manufacturing index climbs to 2025 high, but recovery remains fragile

Yogashen Pillay|Published

There has been a welcome reaction as the Absa Purchasing Managers’ Index (PMI) released on Wednesday increased by 2.7 points to 52.2 points in September 2025 its highest reading this year.

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South Africa’s manufacturing sector showed renewed momentum in September, with the Absa Purchasing Managers’ Index (PMI) rising by 2.7 points to 52.2, its strongest level since October 2024.

The PMI, compiled by Absa, the Bureau for Economic Research (BER) and Stellenbosch University, indicates that the sector returned to expansionary territory, supported by stronger domestic demand.

Encouragingly, the average PMI for the third quarter improved to 50.8 points, up from 45.4 in the second quarter and 46.2 in the first quarter.

However, economists at Absa Corporate and Investment Banking cautioned that the recovery has been volatile, with sluggish global trade, steep US tariffs, and lingering port delays weighing on sustained activity.

“Manufacturers have been cautious when making employment decisions, due to extended periods of subdued demand not sufficient to lift production along with rising labour costs,”Absa said.

“The purchasing price index increased by 3.3 points, edging up to 61.7 in September, despite the fall in fuel prices at the start of the month and stability in the exchange rate.

The business activity index jumped 12.1 points to 57.9 in September, moving into expansionary territory for the first time since October 2024. New sales orders also recovered, rising 8.8 points to 56.1, after a sharp drop in August.

Absa noted that the domestic market drove this rebound, while export demand stayed muted.

The supplier deliveries index edged up 1.8 points to 54.8, reflecting slower delivery times as new orders surged against ongoing logistical constraints.

By contrast, the employment index fell back to 42.8 points, erasing August’s brief gains, as manufacturers remained cautious about hiring in the face of weak long-term demand and rising labour costs.

Economists welcomed the rebound but warned that it might not be sustained.

Professor Raymond Parsons of the North-West University Business School said the September PMI confirmed stronger business activity following better-than-expected GDP growth in the second quarter.

However, Parsons said the fact that the index expects business conditions in the next six months to significantly deteriorate remained a very worrying feature.

“There are clearly still a number of global and domestic uncertainties that might weaken or upset present growth expectations. It therefore means that the present economic recovery will still need strong support in the months ahead,” Parsons said.

Professor Waldo Krugell, an economist at North-West University, described the results as a “pleasant surprise.”

Krugell noted that the business activity and sales indices improved sharply, but cautioned that the economy remains fragile given that forward-looking indicators point to contraction.

“These high-frequency indicators have been trending downwards and an improvement is a pleasant surprise. Maybe the recovery in demand mirrors the slight improvement in consumer confidence,” Krugell said.

“The business activity and new sales order indices improved significantly. The fragility of the economy is definitely still there if you note that the expected business conditions in six months are weaker and now in contractionary territory.”

Investec economist Lara Hodes said the September reading was “the most favourable since October 2024,” with new orders and activity strengthening thanks to domestic demand.

Still, she highlighted pressure on manufacturers from higher purchasing prices and continued job weakness.

“The employment index, which has been in negative terrain for over a year, fell to 42.8, from 48.9 logged in August,” Hodes said.

“According to the BER, manufacturers remain prudent around hiring in an unpredictable environment with “extended periods of unsustained demand”, coupled with accelerating labour costs.” 

Unisa economist Dr Eliphas Ndou said that he sees the increase of PMI above 50 index points as highly transitory.

“The weaker economic growth, decline in total employment, and 25.4% decrease in bonuses paid in the second of 2025, point to ongoing weaker demand conditions,” Ndou said.

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