SA’s manufacturing sector remained under pressure in February, with the Absa purchasing managers index (PMI) declining slightly by 0.6 points to 44.7, according to data released by Absa and the Bureau for Economic Research (BER) on Monday.
This marked the fourth consecutive month of contraction.
This latest reading confirms that the sector has yet to shake off the weak momentum seen at the end of 2024, with demand softening further and production slowing in response to persistent cost pressures, fragile global trade and local logistical challenges.
The outcome fell short of market expectations, as Investec economist Lara Hodes had forecasted a rise to 48.5, which would have indicated a slower pace of decline.
With manufacturing contributing about 13% to GDP the sector’s persistent weakness will weigh on overall economic growth.
“SA’s manufacturing sector is constrained by weak demand and rising cost pressures, while an increasingly uncertain external environment bodes ill for the near-term sectoral outlook,” Jee-A van der Linde, economist at Oxford Economics, noted.
In February, the business activity index fell sharply by 2.9 points to 40.6, returning to levels last seen in December. This deterioration reflected both weaker domestic demand and disruptions to input supplies, the BER said.
New sales orders dropped to 38.7, from 42 in January. Export sales dropped significantly, falling deeper into contractionary territory, mainly due to lower-than-expected demand, global trade disagreements and logistical issues.
“A notable decline in export activity was recorded during the month,” Investec economist Lara Hodes said.
“Specifically, the UK’s [a key trading partner] February PMI data indicates manufacturers are facing an increasingly difficult trading environment according to S&P Global.”
With production slowing, manufacturing employment remains in a prolonged slump. The employment index slipped further into contractionary territory, falling to 42.2 from 44.4 in January. This marks the 11th consecutive month of contraction in employment.
Hodes called this “worrying”, adding that “a notable, sustainable lift in confidence and economic growth is essential to drive job creation”.
“A sustained recovery in activity is required for any improvements in employment to start coming through,” BER economist Nkosiphindile Shange noted.
Specifically, the UK’s (a key trading partner) February PMI data indicate that manufacturers are facing an increasingly difficult trading environment according to S&P Global.
— Lara Hodes, Investec
Supplier deliveries, a measure of logistical performance, increased by 5.1 points to 55, suggesting slower delivery times.
While this could sometimes indicate strengthening demand, Shange said the increase probably reflected persistent supply chain constraints, including port delays and transport inefficiencies.
Manufacturers also face renewed cost pressures, as the purchasing price index surged to 70.4, up from 68.2 in January. The depreciation of the rand, coupled with rising international oil prices, has driven up input costs, particularly for fuel.
“The rand exchange rate was relatively weaker in this period, while some input material prices rose amid higher oil prices. With the weaker rand, fuel prices increased for the fourth consecutive month in SA at the beginning of February,” Shange said.
Manufacturers’ expectations for business conditions six months ahead fell sharply to 60.5, down from 64.9 in January.
“Uncertainties about global trade dynamics continued, with some respondents flagging that increased tension in SA-US relations had specifically worsened their prospects. The return of load-shedding may have also weighed on sentiment,” Shange said.
Economists have warned that a meaningful recovery in manufacturing will require stronger domestic demand, improved logistics and a more stable cost environment.
The latest PMI readings suggest that manufacturers remain cautious about near-term prospects, particularly in light of the recent load-shedding, volatile exchange rates and weak international demand.
Update: March 3 2025
The article has been updated with reaction from economists.
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