SA’s manufacturing sector began 2025 on a weak footing with the Absa Purchasing Managers’ Index (PMI) falling by 0.9 points to 45.3 in January, the Bureau for Economic Research (BER) reported on Monday.
This marks the third consecutive month of contraction and the lowest level since August 2024 reinforcing concerns over the sector’s sluggish recovery.
The loss of momentum observed at the end of 2024 has persisted into the new year and while there were some encouraging signs of improvement in activity and demand, they remain within contractionary territory, suggesting that meaningful recovery remains elusive.
The business activity index edged up to 43.5 from 40.3 in December, indicating a slower pace of contraction. However, the sector remains far from expansion.
New sales orders improved to 42 points from 37.4, reflecting some recovery in demand both domestically and internationally. This uptick was likely supported by better export sales, though levels remained below those recorded in November.
Despite this modest improvement, several factors continued to weigh on production and demand, including trade disruptions with Mozambique due to political instability and fuel shortages that affected air freight.
Additionally, the upcoming closure of ArcelorMittal’s long steel business was flagged as a potential challenge for some producers over the next six to twelve months.
While activity and orders showed signs of life three other key components of the index declined.
The employment index dropped to 44.4 from 46.5 in December, marking the tenth consecutive month of contraction.
Manufacturers remain hesitant to expand their workforce with hiring expected to lag until there is a more substantial and sustained recovery in activity.
Supplier deliveries also weakened, with the index falling by 6.1 points to 49.9. Although this suggests faster delivery times, respondents indicated that the decline was due to weaker demand rather than any genuine improvement in supplying goods.
Adding to manufacturers’ concerns, the purchasing price index surged to 68.2 in January, reversing the downward trend seen in late 2024.
This sharp 7.8-point increase was driven by a weaker rand and rising international oil prices, which led to higher fuel costs at the start of the year.
With another fuel price hike expected in February, manufacturers are bracing for further cost pressures, tightening already strained profit margins.
The inventories index declined from 50.7 to 46.5, signalling potential shortages in purchased stock. Should demand pick up unexpectedly, production could be hampered by supply constraints.
The index measuring expected business conditions in six months slipped to 64.9 from 67.5, reflecting uncertainty over global trade dynamics and continued domestic challenges.
Despite this dip, the BER reported that manufacturers remain relatively optimistic about future conditions.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.