SA’s manufacturing sector showed a marked improvement in March with the Absa Purchasing Managers’ Index (PMI) rising by four points to 48.7 — its highest level since October’s 52.6 points.
However, the index remained below the neutral 50-point threshold, marking the fifth consecutive month of contraction, the Bureau for Economic Research (BER) and Absa reported on Tuesday.
“The PMI rose mainly due to new sales orders and business activity,” Absa economists noted.
The Absa PMI is a key early indicator of the health of SA’s manufacturing sector — a vital contributor to jobs and exports.
Manufacturing contributes about 12%-13% of SA’s GDP, according to recent data from Stats SA. In the latest Quarterly GDP report (2024) the sector’s contribution stood at 12.4%, making it one of the country’s largest industries alongside finance, trade and mining.
Despite some recovery in March the sector is still grappling with a weak start to the year. The average PMI for the first quarter of 2025 came in at 46.2, well below the 49-point average recorded in the fourth quarter of 2024.
The business activity index rose sharply by 7.7 points to 48.3 reflecting improved demand. While this remains below the 50-point level that separates expansion from contraction, it indicates the pace of decline has slowed.
More notably, new sales orders jumped by 10.2 points to 48.9 driven by a resurgence in export demand. According to the BER and Absa, this was the first time in four months that export sales returned to expansionary territory despite continued global trade tension and lingering port congestion.
“Comments from respondents indicate that logistical issues at the ports remain, and souring relations with the biggest economy in the world is bringing uncertainty — although it may not be affecting trade at the moment,” the report stated.
According to Investec economist Lara Hodes, this is supported by March’s HCOB Eurozone Manufacturing PMI survey results “which indicated the first signs of meaningful recovery in the eurozone manufacturing sector”.
The employment index rose by 3.9 points to 46.1 a notable improvement from February. However, it remained in contractionary territory for the twelfth consecutive month.
“Growth remains lacklustre, with a pick-up in sentiment and accordingly investment and growth needed to drive a sustainable lift in employment,” Hodes said.
Manufacturers also pared back their stockpiles. The inventories index ticked down to 45.9 as manufacturers reduced the stock of finished goods and raw materials, possibly with activity still slow to recover.
The supplier deliveries index declined slightly to 54.1 indicating a modest improvement in delivery times (the index is inversed with an increase in delivery times resulting in a decline in the index).
However, the BER and Absa cautioned the improvement may not necessarily reflect better functioning supply chains and could instead signal weak demand.
Encouragingly for manufacturers, cost pressures eased. The purchasing price index dropped by 5.9 points to 64.5, as the rand strengthened against the US dollar and local fuel prices declined by between 7c and 23.5c per litre at the start of March. This marked a reversal of the price surge seen in January and February.
“With the 12.74% electricity tariff increase due to kick in from April for direct Eskom customers, the cost index could come in higher in the next survey,” Absa economists said.
Despite the recovery in activity, the index tracking expected business conditions in six months fell by 2.5 points to 58, dipping below the 60-point mark for the first time since May 2024.
“Sentiment may have been dampened by the ongoing concern about the threat of further escalation in restrictive trade policies,” Absa said.
While manufacturers appear cautiously optimistic the external environment remains volatile and unpredictable.
“The return of load-shedding and the souring SA-US relations likely continue to weigh on sentiment,” the researchers said in the report.
Update: April 1 2025
The story has been updated with comment by economists.
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