South Africa

South African manufacturing struggles amid weak demand, rising costs

Conditions in South Africa’s manufacturing sector deteriorated at the end of the third quarter.

This is according to the Absa Purchasing Managers’ Index (PMI), which declined by 4.3 points in September to 45.4. 

The soft reading for the headline PMI was driven by very weak demand and constrained production. 

In terms of the former, September saw an outsized decline of more than 10 index points in the new sales orders index, which fell back to a level last seen in mid-2021. 

External and domestic demand for South African manufactured goods seems to have been under pressure, with the export index hit hard in September. 

This most likely reflects the weakening growth momentum in the Eurozone and the UK, both key export markets for local manufacturers. 

On the domestic front, restrictive borrowing costs and perhaps also the sharp fuel price hikes at the start of September weighed on demand.

It was also a poor month for production as the PMI business activity index tanked by 8.1 points to 41.9. 

This index was extremely volatile in the third quarter. Compared to August, there was a step-up in load-shedding during September. 

Along with poor demand conditions, this may help to explain the low level of activity during the month. 

For the entire third quarter, the business activity index averaged 43.3, down from an average of 48.1 in the second quarter. 

The move lower would be consistent with a quarterly contraction in actual manufacturing output. If this materialises, it will weigh on overall GDP growth momentum in the third quarter.

Moving away from activity to input costs, the PMI purchasing price index increased for the second month in a row. 

This is consistent with sustained rand weakness and the sharp move higher in international oil prices during the past month. As a result, another significant diesel price increase is on the cards for October.

On a more positive note, purchasing managers do not expect the current tough trading conditions to persist. The index measuring expected business conditions in six months rose to 55.6, the highest level since March 2023.

Business activity

The business activity index saw large swings during the third quarter. Following a notable decline in July, the index bounced back to reach the neutral 50-point mark in August.

The July gain was reversed almost entirely in September, with the index falling back notably to around 42. From a real GDP perspective, the index averaged around 5 points lower in the third quarter than the preceding one.

This suggests that actual manufacturing output probably declined in Q3, weighing on real GDP growth momentum during the quarter.

New sales orders

The new sales orders index has been stuck below the 50 mark that divides expansion from contraction since January 2023, indicating soft underlying demand for locally manufactured goods.

The index took a further notable leg down in September, crashing to 35.3 points. This is the lowest reading for this index since mid-2021 and reflects weakening demand in some of SA’s major export markets, as well as domestically.


After losing ground in August, the employment index remained at a depressed level in September.

The latest official data from Statistics SA indicated that formal sector employment in the manufacturing sector declined by 10,000 quarter-on-quarter in the second quarter.

On an annual basis, i.e., compared to 2022 Q2, factory sector employment rose by 12,000.

Based on the PMI employment index for July to September, the third quarter was poor in terms of job creation in the manufacturing sector.


At 44, the inventories index moved lower after remaining largely unchanged in the three months through August.

Supplier deliveries

The supplier deliveries index remained elevated in September.

This index is inverted in the headline PMI index calculation, implying that longer supplier delivery (lead) times boost the headline PMI.

With the PMI demand indicators weak in September, the fact that the supplier delivery index remained high suggests some lingering supply-side issues following disruptions in July (N3 truck torchings) and August (Western Cape taxi strike).

Purchasing prices

The PMI purchasing price index moved higher for the second month in a row.

This is consistent with sustained rand weakness and the sharp move higher in international oil prices during the past month.

As a result, another significant diesel price increase of more than R1.50/litre is on the cards for October.


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