Factory activity in South Africa continued to decline in June, marking another month of contraction, according to the latest data from the Absa Purchasing Managers’ Index (PMI). The PMI, a key indicator of manufacturing performance, fell to 47.9 in June from 49.2 in May, remaining below the 50-point mark that separates expansion from contraction.
The persistent decline in factory activity highlights the ongoing challenges faced by the manufacturing sector amid a sluggish economic environment. Absa noted that weak domestic demand and supply chain disruptions have continued to hamper production, with manufacturers struggling to maintain momentum.
“The decline in the PMI reflects the difficult conditions that manufacturers are currently facing. Input costs remain high, and there are ongoing issues with the availability of raw materials,” said Miyelani Maluleke, a senior economist at Absa. “Additionally, load shedding and electricity supply concerns have also contributed to the subdued performance of the sector.”
The sub-indices of the PMI further illustrate the breadth of the challenges. The business activity index dropped to 43.7, indicating a significant slowdown in production. New sales orders also remained weak, falling to 45.3, as both domestic and international demand showed signs of strain.
Employment in the sector continued to be a concern, with the employment index remaining below the neutral 50-point level, signaling job losses and reduced hiring activity. “The weak employment numbers are worrying, as the manufacturing sector is a key employer in the economy,” Maluleke added.
The latest PMI data underscores the urgent need for interventions to support the manufacturing sector. Industry stakeholders have called for increased government support, including measures to stabilize electricity supply and initiatives to boost domestic demand.
Despite the challenges, some industry leaders remain cautiously optimistic. “While the current situation is challenging, there are opportunities for growth if we can address some of the structural issues facing the sector,” said Zanele Mbeki, CEO of a leading manufacturing firm. “Investment in infrastructure and skills development will be critical to revitalizing manufacturing in South Africa.”
As South Africa grapples with these economic challenges, the Absa PMI will continue to be a closely watched indicator of the health of the manufacturing sector. The coming months will be crucial in determining whether the sector can overcome its current hurdles and return to a path of growth.
