Manufacturing PMI for April shows deteriorating SA economy

The Citizen

02-05-2025

The seasonally adjusted PMI remained in contractionary territory for a sixth consecutive month, which is bad news for GDP.
The manufacturing PMI for April shows how the South African economy is deteriorating as it sinks deeper into contractionary territory, decreasing by 4 points to 44.7.
The seasonally adjusted Absa Purchasing Managers' Index (PMI) is an economic activity index based on a survey conducted by the Bureau for Economic Research and sponsored by Absa among a representative group of purchasing managers in the South African manufacturing sector.
These purchasing managers have to indicate each month whether a particular activity, such as new sales orders, for their companies increased, decreased or remained unchanged. A value of 50 indicates no change in the activity, a value above 50 indicates increased activity, and a value below 50 indicates decreased activity.
The BER points out that the respondents' commentary was decidedly more negative in April, with some suggesting that demand was weak amid the uncertainty created by the global tariffs saga and local developments. Beyond the politics, excessive rains also caused problems for some producers.
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PMI shows decrease in expected business conditions
It is worrying that the index tracking expected business conditions in six months' time decreased further, the BER says. The index was down by 9.4 points to 48.6 in April, edging below 50 points for the first time since the 41 points recorded in November 2023.
The BER says the return of load-shedding, global tariff developments and local political uncertainty due to the VAT saga in the budget and open disagreements within the government of national unity (GNU) likely weighed on sentiment.
In response to struggling demand, the business activity index decreased significantly by 8.3 points to 40 in April, while new sales orders declined by 12.8 points to 36.1 points in April, with domestic demand and export sales decreasing. The index tracking export sales returned to contractionary levels.
Meanwhile, despite weak demand, the supplier deliveries index increased by 2.5 points to 56.6 points. Since this index is inverted, the BER points out that this suggests that delivery times have lengthened and are slower.
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Increased bottlenecks in logistics, even with low demand
'Given the slowdown in activity and fewer orders being processed, this suggests increased bottlenecks in the supply chain processes, causing delays that struggle to improve in a low-demand environment,' the BER says.
The employment index decreased by 3.2 points to 42.9 and remained in contractionary territory for 13 consecutive months. Sluggish demand, uncertainty and competition from imports have caused production declines for local manufacturers, leading to staff layoffs to match current production levels, the BER says.
However, the inventories index ticked up slightly to 47.8 in April from 45.9 in March, with some manufacturers reporting they were stocking up on materials amid uncertainty around tariffs.
The purchasing price index increased by 3.8 points to 68.3 in April, despite fuel price cuts at the start of the month, while the cost of imported materials increased significantly in the first two weeks of April as the rand exchange rate weakened and remained above R19/$, although it has since strengthened to below R19/$.
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PMI shows weak demand in uncertain global economic outlook
Jee-A van der Linde, senior economist at Oxford Economics Africa, says demand for goods manufactured in South Africa remains weak, while an uncertain global economic outlook also constrains activity.
'Moreover, manufacturers have grown more despondent about future business conditions due to political uncertainty and as the impact of US trade tariffs sets in.'
This graph shows how manufacturing PMI dropped in April as demand conditions deteriorated:
Source: BER
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PMI's poor start to second quarter of 2025 not good news
Van der Linde says the manufacturing sector appears to have recorded a poor start to the second quarter after averaging 46.2 in the first quarter of 2025, which was lower than the 49.0 reading in the fourth quarter of 2024.
'Considering South Africa's uncertain political environment, combined with the backdrop of building global headwinds, the outlook for the South African economy has deteriorated. Real gross domestic product (GDP) growth for 2025 has been revised down to 1.0% from 1.5% previously, due to expectations of reduced merchandise trade and lower private sector investment in the near term.'
This table shows how the employment index remained in contractionary territory for the past 13 months as manufacturers keep scaling down production because demand is not improving:
Source: BER