South Africa’s manufacturing sector weakens for fourth straight month
South Africa’s Absa Purchasing Managers’ Index fell to 45.8 in August, its lowest reading of 2026, as business activity and new sales orders weakened. Economists said subdued domestic demand remained a key concern, although improved six-month expectations offered some hope.
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) declined from 46.8 points in July to 45.8 points in August.
This marked the fourth consecutive monthly decline and the lowest reading so far this year, signalling a weak start to the second half of 2026. A reading below 50 indicates contraction.
Absa said the sharp deterioration in business activity was particularly concerning. The index fell by 8.6 points to 40.2, its lowest level this year.
The new sales orders index also declined, from 44.1 to 40.3. Export sales were somewhat less weak, suggesting that the renewed deterioration in demand was largely domestically driven.
Respondents pointed to subdued demand, weak consumer confidence and particularly soft spending on non-essential goods.
Absa said that the employment index rose from 42.2 to 46.2. However, it remained below the neutral 50-point mark, signalling continued contraction in factory employment, albeit at a slower pace.
The supplier deliveries index increased from 55.5 to 58.6. A higher reading on this index generally reflects longer delivery times, rather than stronger demand.
Absa concluded that index tracking expected business conditions in six months’ time rebounded from 49.3 to 54.7, moving back above the neutral 50-point mark. “This provides some hope that manufacturers view the current weakness as temporary.”
Respondents reported container shortages, limited shipping space and renewed delays at Durban harbour.
Purchasing prices were unchanged in August at 67.2, although they softened from levels recorded in the second quarter. Investec economist Lara Hodes said fuel-price increases in September were likely to place renewed pressure on producers.
Hodes said the August PMI had fallen further into contractionary territory.
“Business activity plunged 8.6 points to 40.2, the lowest reading recorded this year. Moreover, the new sales index slipped to 40.3 from 44.1, which does not bode well for manufacturing production for the third quarter of 2026,” she said.
Hodes said survey respondents had pointed to subdued demand, weak consumer confidence and soft spending on non-essential goods as consumers grappled with the elevated cost of living.
She added that export sales appeared less weak, while global manufacturing conditions were more robust.
Professor Waldo Krugell, an economist at North-West University, said the figures highlighted the challenges facing the manufacturing sector.
“A significant deterioration of business activity, much lower new sales orders, and the purchasing price sub-index shows costs stable, not declining,” he said.
Krugell said the fuel-price shock was putting pressure on households and limiting domestic demand for manufactured goods.
He said the improvement in expected business conditions six months ahead was “a small ray of hope”.
“There’s still some optimism but the sector, I think, is having a tough time,” Krugell said.
Professor Raymond Parsons, an economist at the North-West University Business School, said the weak August performance showed that the challenge remained to get the economy moving in the second half of 2026.
“Manufacturing clearly remains under pressure from several negative factors,” he said.
“The good news is that survey respondents see the August figures as a temporary setback that is capable of reversal in the months ahead.”
Parsons said South Africa should focus on implementing domestic growth policies and projects.
He said the outlook remained one of reduced but positive GDP growth of about 1% or more in 2026 as a whole.
yogashen.pillay@nationalmg.co.za