Sentiment in South Africa’s manufacturing sector deteriorated in June, as weaker demand weighed on new orders, even as easing global energy prices offered some relief to cost pressures, a closely watched business survey showed on Wednesday.
The seasonally adjusted Purchasing Managers’ Index (PMI), compiled by Absa Group and S&P Global, fell to 47.3 in June from 50.8 in May, slipping back below the 50-point threshold that separates expansion from contraction in factory activity.
The decline signals a renewed downturn in manufacturing conditions after a brief return to growth in the previous month. The index is widely regarded as a leading indicator of industrial momentum and broader economic health in South Africa, Africa’s most industrialised economy.
Absa attributed the weaker reading primarily to a drop in new orders, as some clients delayed purchases amid expectations that input costs could fall further. Respondents to the survey reported that uncertainty around pricing trends contributed to hesitancy in procurement decisions, weighing on production volumes.
A sharp decline in the PMI’s purchasing price component suggested that inflationary pressures may have peaked in recent months. The bank noted that fuel price cuts implemented in early July, alongside a broader easing in global oil markets, helped improve cost expectations among manufacturers.
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“April and May may have marked the peak of price pressures,” Absa said, pointing to a marked slowdown in input cost increases compared with earlier in the year.
The survey period coincided with shifting global energy dynamics, including an interim agreement between the United States and Iran aimed at ending hostilities and reopening the Strait of Hormuz — a key shipping route for global oil supplies. The development contributed to a decline in international oil prices, which in turn filtered through to domestic fuel and transport costs.
Despite the weaker current conditions, the PMI’s forward-looking indicator showed an improvement in sentiment. A sub-index measuring expected business conditions over the next six months rose, reflecting cautious optimism that easing geopolitical tensions could support a more stable global demand environment.
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However, Absa noted that sentiment was not uniformly positive across all respondents. Some manufacturers cited domestic political and social tensions, including nationwide anti-migrant protests reported at the end of June, as a factor dampening confidence and complicating the operating environment.
These concerns, combined with subdued new orders, prevented a stronger rebound in overall factory sentiment, even as cost pressures moderated.
South Africa’s manufacturing sector has faced persistent headwinds in recent years, including weak domestic demand, infrastructure bottlenecks, and intermittent energy constraints. While inflation has eased from previous highs, businesses continue to report uneven recovery conditions across subsectors.
Economists often use PMI readings as an early signal of industrial output trends ahead of official production data. A sustained reading below 50 typically suggests contraction in factory activity, while readings above that level indicate expansion.
The latest figures suggest that while cost relief may be emerging, demand-side pressures remain the key constraint on South African manufacturers heading into the second half of the year.
Absa Group Limited is one of South Africa’s largest financial services institutions and a key compiler of business sentiment indicators in the region.
