Absa’s purchasing managers’ index (PMI) unexpectedly rebounded in April, returning to expansionary territory for the first time since September as a result of what might not be a sustainable improvement in manufacturing sentiment.
The economy is feeling the effects of the war pitting the US and Israel against Iran.
The seasonally adjusted PMI — an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) and sponsored by Absa — increased to 52.6 in April from 49.0 in March, driven by stronger business activity and a sharp recovery in new sales orders.
“The April PMI results suggest the manufacturing sector has made a stronger start to the second quarter, with activity and demand rebounding after a weak first quarter. However, the improvement appears to be driven in part by temporary factors such as front-loaded demand and precautionary stock-building,” the report stated.
“At the same time, sharply rising input costs and continued weakness in export demand present significant risks to the sustainability of the recovery.”
The business activity index increased by 6.7 points to 52.8, moving above the neutral 50-point mark for the first time since late 2025. New sales orders were up 8.4 points to 52.9, also returning to expansionary territory.
The increase appears to have been driven primarily by stronger domestic demand, while export sales continued to decline, the report said. Some respondents noted orders may have been brought forward in anticipation of further cost increases, which could result in weaker demand in the coming months.
Rising costs for the manufacturing sector will stem largely from steep fuel price increases due to the Middle East war, which have already rattled the economy. This is despite the government introducing some relief by slashing the general fuel levy since April 1.
This temporary measure, which will see the government forgo R17.2bn in tax revenue, will, however, be phased out before July.
The latest data from Stats South Africa last month showed factory output fell year on year in February, the fourth consecutive contraction, pointing to a decline for the sector in the first quarter that will weigh on GDP in 2026.
In the April PMI report, the inventories index increased by 3.5 points to 52.3, breaching the divide between contraction and expansion for the first time since August. This is likely a reflection of stock-building behaviour as firms purchase inputs ahead of expected price increases, the BER and Absa said.
The supplier deliveries index eased slightly from March but remained elevated at 61.4. As this index is inverted, the high level indicates slower delivery times.
Given ongoing global shipping disruptions due to the Middle East conflict and local logistical constraints, the signal is more likely to reflect supply-side challenges than stronger demand and should therefore be interpreted with caution, the report said.
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.