Factory activity at lowest level in 2026 as demand remains weak

Manufacturing activity remained depressed in August, with Absa’s purchasing managers’ index (PMI) declining further to 45.8 points from 46.8, its fourth consecutive month-on-month retreat.

The index — a measure of economic activity derived from a survey conducted by the Bureau for Economic Research (BER) on behalf of Absa — was at its lowest level so far this year, mainly due to a sharp deterioration in business activity, the index of which fell 8.6 points to 40.2.

The August report points to continued strain in the manufacturing sector, which has grappled with weak demand and higher input costs this year, including more expensive fuel as a result of the US-Iran war disrupting global oil supply. South Africa is a net importer of crude oil and petroleum products.

Factory production contracted in the first half of this year, and is likely to be a dampener on overall economic output in the second quarter of 2026. Stats South Africa will release the GDP report next week.

In the August PMI survey, new sales orders gave up the gains recorded in July, falling to 40.3 from 44.1 points. Export sales appeared somewhat less weak than the previous month, suggesting that the renewed deterioration in demand was largely domestically driven.

“Comments from respondents similarly pointed to subdued demand, weak consumer confidence and particularly soft spending on non-essential goods,” Absa said.

Cost pressures remained elevated, with the purchasing price index unchanged at 67.2 points after declining significantly from its May peak of 84.8.

“Higher diesel and international oil prices added to costs during the month, while a stronger rand provided some relief on imported inputs. Respondents’ comments also pointed to higher freight and delivery costs,” said Absa.

Fuel prices are set to rise again from Wednesday, with the pump price of 95-grade petrol climbing R1.34 to R26.92/l in the economic hub of Gauteng, while the wholesale cost of diesel will jump by R2.95 and R3.15 for 0.05% sulphur grade and 0.005% sulphur grade, respectively, to as high as R29.11/l.

The employment index in the PMI rose to 46.2 points in August from 42.2, but was still below the neutral 50-point mark separating expansion and contraction, signalling that factory employment is on the decline, albeit at a slower pace than previously.

The supplier deliveries index rose from 55.5 to 58.6, although this appeared to reflect slower deliveries rather than stronger demand. Several respondents in the survey reported container shortages, limited shipping space and renewed delays at Durban harbour.

Business Day