Manufacturing activity declined in December, with the seasonally adjusted purchasing managers index (PMI) falling by 1.9 points to 46.2, the Absa survey showed on Wednesday.
This marked the second consecutive decline, keeping the index firmly in contractionary territory and reflecting the challenging economic environment manufacturers faced at the end of last year.
The PMI is one of the most important indicators of the health of the economy. The sector accounts for about 13% of GDP.
The fourth quarter of 2024 averaged a PMI of 49 points, only slightly below the 49.8 points recorded in the third quarter, but still better than the averages of the first (47.8) and second (48.1) quarters.
After showing signs of improvement in September and October, the sector took a downturn in November and December, highlighting its continued unpredictability.
December was also a slower month due to the holiday season and the closure of many businesses, which probably contributed to the weaker performance of the manufacturing sector.
The business activity index decreased by 8.7 points to 40.3 in December. The pullback in production came as a result of a sharp fall in demand.
The new sales orders index dropped significantly to 37.4 from 45.9 in November, reversing the gains of September and October. Absa noted that December conditions were worse than typically seen during this period, a worrying sign for the sector.
Export sales, which had shown signs of recovery, reverted to levels last seen in the first half of 2024.
The December decline was driven by weaker demand, both domestically and internationally, alongside logistical challenges.
The supplier deliveries index rose to 56 points, its first climb above 50 in three months. However, this uptick was not due to robust demand but rather to logistical constraints locally and globally.
The employment index remained in contractionary territory for the ninth consecutive month, declining slightly to 46.5.
This paints a bleak picture for job creation, with the index staying below the neutral 50-point mark for 11 of the 12 months in 2024.
The purchasing price index fell by 1.3 points to 60.4 in December, offering some relief to manufacturers grappling with input costs. The respondents noted that this was unexpected, given that the rand was relatively weaker in December and fuel prices increased.
On a positive note, the index measuring expected business conditions in six months rose by 5.2 points to 67.6, indicating that manufacturers remain optimistic about business conditions in the future.
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