South Africa’s Manufacturing PMI Slips Into Contraction in June
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) fell 3.5 points to 47.3 in June, moving below the neutral 50‑point threshold after two months of expansion. Compiled by the Bureau for Economic Research (BER), the reading signals a contraction in overall manufacturing activity, driven primarily by weaker demand even as input cost pressures eased and business confidence improved.
Key PMI Components
- Overall PMI: 47.3 (down from 50.8 in May)
- Business activity index: 45.6 (up slightly from 43.5)
- New customer orders index: 40.6 (down from 44.6)
- Inventories index: 49.0 (down from 55.8)
- Employment index: 41.4 (down sharply from 48.4)
- Supplier delivery (inverted) index: 60.0 (down from 61.6)
- Purchasing price index: 71.3 (down 13.5 points)
- Six‑month outlook index: 56.6 (up from 52.9)
All figures are sourced directly from the Absa/BER PMI release for June 2024.
Demand Weakens Across the Sector
The new customer orders index marked its second consecutive monthly decline, falling to 40.6 from 44.6 in May. Purchasing managers reported that some customers are postponing purchases in anticipation of lower prices, a trend linked to easing oil prices and fuel costs as Middle‑East tensions de‑escalate. This shift follows a surge in advance demand early in the second quarter, which had briefly pushed the orders index above the 50‑point mark in April.
Input Cost Pressures Ease
The purchasing price index dropped 13.5 points to 71.3, the largest monthly decline in recent months. Absa attributed this relief to three main factors:
- Lower Brent crude oil prices
- A relatively stronger South African rand
- Recent diesel price cuts
Together, these developments suggest that the peak of manufacturing price pressures observed in April and May has passed, providing manufacturers with notable cost relief.
Employment and Inventory Trends
Manufacturers’ own inventories slipped below the neutral level, falling to 49.0 from 55.8, indicating a cautious approach to stock replenishment. The employment index fell sharply to 41.4, erasing the modest gains seen in May and highlighting continued reluctance to hire amid weak demand and uncertainty about the pace of recovery.
Outlook Improves Amid Geopolitical Easing
Despite the current contraction, the six‑month outlook index rose to 56.6, up from 52.9 in May. This increase reflects improved expectations for business conditions, driven by the prospect of lasting peace in the Middle‑East conflict and the associated reduction in geopolitical risk. Absa noted that manufacturers anticipate further declines in input prices, which underpins the more optimistic forward‑looking sentiment.
Risks and Domestic Uncertainty
Respondents continued to cite domestic uncertainties as potential headwinds. Notably, Tuesday’s nationwide protests against illegal immigration were mentioned as a risk factor that could disrupt business activity. While external pressures such as oil prices are easing, internal social and political dynamics remain a source of volatility for the sector.
Conclusion
The June PMI data paint a nuanced picture of South Africa’s manufacturing landscape: demand has weakened, pushing the overall index back into contractionary territory, yet manufacturers are benefiting from lower input costs and expressing greater confidence about the medium‑term outlook. Continued monitoring of both external commodity trends and domestic socio‑political developments will be essential for assessing whether the sector can regain momentum in the coming months.
