Absa Manufacturing Survey reveals decline in business confidence amid economic challenges

IOL News

6 hours ago

The Q2 2025 Absa Manufacturing Survey indicated that the Business confidence declined marginally to 33 points, down from 34 in Q1, an outcome some noted could have been significantly worse given prevailing conditions.
Manufacturing business confidence dipped in the second quarter amid domestic and global uncertainty.
This was revealed in the second quarter 2025 Absa Manufacturing Survey. Business confidence declined marginally to 33 points, down from 34 in quarter one, an outcome some noted could have been significantly worse given prevailing conditions.
The manufacturing survey was conducted by the Bureau for Economic Research (BER) drawing insights from approximately 700 manufacturing businesses. Economists have echoed similar sentiments
The confidence index ranges from 0 (no confidence) to 100 (extreme confidence).
Absa said domestically, manufacturers also faced several challenges. These included subdued product demand, rising electricity tariffs and water supply disruptions – particularly in Gauteng, compounding to the sector's strain.
Sachin Chanderdhev, a sector specialist for the Manufacturing Sector at Absa Business Banking said during the survey period, gross domestic product (GDP) forecast downgrades, the evolving Budget 2.0/3.0 and political tension within the Government of National Unity contributed to heightened local uncertainty.
'Internationally, geopolitical concerns also persisted, notwithstanding the high-profile White House engagement between South Africa and the United States,' Chanderdhev said.
Domestic and export sales deteriorated sharply, falling by 22 and 32 points, respectively. Similarly, new domestic and export orders dropped by 25 and 35 points, indicating sustained demand-side pressure amid constrained consumer purchasing power.
Survey indicators - tracking sectoral constraints including insufficient demand, political uncertainty and skilled labour shortages - also worsened during the period.
Transport, capital and chemicals subsectors were the main contributors to the overall drop in sentiment. Notably, confidence in the Transport subsector declined steeply to 3 points, down from 27 in quarter one, which Chanderdhev suggested may reflect concern around US tariff increases and uncertainty regarding the continuity of multinational production operations in South Africa.
Conversely, the furniture and metals & glass subsectors recorded confidence gains of 16 and 9 points, respectively.
The latest indicators follow a two-point decline in quarter one, indicating that the manufacturing sector remained under pressure in the first half of 2025 as demand remains constrained.
Gross value added by the South African manufacturing sector declined by -2% quarter-on-quarter in the first quarter, following a 1.1% contraction in quarter four.
Waldo Krugell, an economics professor at North-West University, said the survey shows some really worrying numbers indicating weak demand and local and international uncertainty.
'My worry is that this again means low investment and no economic growth. The recent GDP numbers showed that if investment in machinery and equipment is excluded, private investment is now 30% lower than before the Covid pandemic," said Krugell. "There is not much that South Africa can do about real wars and trade wars elsewhere, but it is clear that we need more certainty and a lot more speed with the reforms that are underway in SA.'
He said a drop of confidence in the transport sector is telling of too slow progress being made at Transnet.
North West University Business School economist Professor Raymond Parsons said the Absa survey again confirms that South Africa's economic recovery is slow and uneven.
'Whilst the manufacturing sector outlook remains uncertain, retail sales in April, on the other hand, were strong. The Absa survey is a further reflection of the extent to which global and domestic uncertainty is still hampering SA's incipient economic recovery in a key business sector, Parsons said. "It emphasises why the hesitant economic upturn needs maximum policy support.'
Efficient group chief economist Dawie Roodt said, 'It is clear the confidence in the broader economy is not what it is supposed to be. When we talk about manufacturing what has been happening in South Africa for many decades is we are having deindustrialisation, which means we are closing down factories.'
Professor Bonke Dumisa, an independent economic analyst, said unfortunately the manufacturing sector has been negatively affected globally. 'There are significant global market jitters because of the US tariff wars. It is against this background that manufacturing, mining, and other sectors have been so negatively affected.'
BUSINESS REPORT
https://businessreport.co.za/