SA’s manufacturing sector showed a welcome rebound in June with the Absa Purchasing Managers’ Index (PMI) rising by 5.4 points to 48.5 — the second-highest reading this year after March.
Despite the improvement, the PMI remained in contractionary territory (below 50) for an eighth consecutive month, highlighting that the sector was still struggling to gain sustained momentum.
The Bureau for Economic Research (BER), which compiles the survey, said the 5.4-point gain was the largest monthly improvement since September last year.
"Following a poor performance in the first quarter, the manufacturing sector needs to make up considerable ground in the second quarter," said Jee-A van der Linde, senior economist at Oxford Economics.
"Although actual production increased by 1.9% month on month in April, factory output levels were still 6.3% lower than last year, with the May manufacturing PMI number indicating activity remained sluggish due to muted demand."
According to Van der Linde, the June PMI figures indicate the average for the second quarter is lower than that of the preceding quarter.
"This aligns with our overall view for the SA economy, which is that general activity is unlikely to have improved from the start of the year."
In June, new sales orders climbed sharply by 7.8 points to 46.1, as domestic demand strengthened and export sales recovered modestly after hitting lows in May.
However, the improvement in demand did not translate into higher production with the business activity index slipping by 1.5 points to 41.9, suggesting manufacturers remain cautious about ramping up output.
The employment index rose strongly, gaining 9.7 points to 49.7, its highest level in more than a year. “This is a big jump for this index, but it needs to be sustained for some months before we can be confident that the manufacturing sector is adding jobs at a significant pace,” the Absa PMI report states.
Inventories increased to 49.9 in June, reflecting some restocking as firms prepared to meet rising demand. Supplier deliveries also lengthened, with the index climbing to 55.1. Respondents said that that was likely to have been due to busier suppliers rather than significant new bottlenecks.
Cost pressures continued to ease. The purchasing price index fell by 2.3 points to 58.1, supported by a stronger rand and lower diesel prices, despite higher international oil prices.
“Despite some volatility, the rand was on average 40c stronger to the dollar than in May and stayed below R18/$ for a large part of the month. On average, the Brent crude oil price was higher in June than in May, but the decline in diesel prices at the start of June likely helped,” the report stated.
The index tracking expected business conditions over the next six months was unchanged at 62.5, maintaining the improved sentiment recorded in May.
Update: July 1 2025
This story includes additional comment from an economist.
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