Manufacturers’ sentiment ended 2025 at its lowest level in six years, with the Absa purchasing managers’ index (PMI) declining by 1.5 points to 40.5 in December.
A PMI reading below 50 indicates that manufacturing activity is contracting, meaning overall business conditions in the sector are deteriorating.
The latest reading — the lowest since April 2020, at the start of the Covid-19 pandemic — was dragged down by sharp declines in inventories and employment.
According to the report by the Bureau for Economic Research (BER), the plunge in the inventories index and a big decline in employment were the main contributors to the weaker headline figure.
The new sales orders index was little changed at 35.4, reflecting sluggish demand, while business activity jumped 9.4 points to 46.1.
“There were some improvements in export orders, however these were insufficient to make a significant contribution to a turnaround in demand,” the report says.
The business activity index was in contractionary territory for 11 months in 2025, underscoring the persistence of weak underlying conditions.
The employment index plunged 6.3 points to 39.9, remaining in contractionary territory since early 2024, as manufacturers cut staff amid persistent demand weakness.
The BER notes that a shortage of specialised skills in some niche industries also weighed on employment outcomes.
“Weak demand and activity in the sector have not presented a strong case for employment growth. Only strong economic growth and recovery will lead to better employment outcomes,” the report says.
Inventories fell sharply, with the index down nearly 10 points to 36.1, the lowest since May 2020. The report says the drop was driven by destocking as firms looked to manage costs due to weak orders and economic uncertainty.
The supplier deliveries index remained stable, edging slightly lower to 45.1 from 45.5 in November.
Input costs eased notably at year-end. The purchasing price index dropped 4.5 points to 50, the lowest level since late 2009. The BER says the stronger rand helped alleviate import cost pressures, offsetting higher fuel and diesel prices in early December. A further drop in diesel prices at the start of 2026 is expected to help contain inflationary pressures in the new year.
Despite the weak conditions, sentiment improved sharply. The index tracking expected business conditions in six months surged 18.1 points to 68.8, its highest level since September 2024.
“Seasonally adjusted manufacturing output has disappointed thus far in [the fourth quarter of] 2025, as South Africa’s manufacturing sector continues to experience strain due to weak domestic demand and the impact of US import tariffs,” said Oxford Economics senior economist Jee-A van der Linde. “We do not anticipate a meaningful improvement in the near term.”
Update: January 8 2026
This story has been updated with an economist’s comments.
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