As South Africans woke up to the certainty of 30% tariffs from the US, they also face continued deterioration in manufacturing sentiment.
The latest update from the Absa Purchasing Managers’ Index (PMI) for July 2025, which points to this deterioration as it remains in contraction for a sixth straight month.
The seasonally adjusted PMI increased by 2.3 points to 50.8 in July, following eight consecutive months in contractionary territory. The improvement was driven by a sharp rebound in demand conditions, lifting the headline index above the neutral 50-point mark for the first time since October 2024.
Key highlights from the July 2025 PMI include:
- Demand Rebounds Strongly: New sales orders surged by 9.7 points to 55.9, recording a third consecutive month of improvement. The rebound was largely fuelled by domestic demand, although export sales also posted modest gains. This signals a solid recovery in order books at the start of Q3.
- Production Activity Improves But Remains Weak: The business activity index increased by 5.2 points to 47.1. Despite the improvement, the index stayed below the 50-point mark, suggesting that while production picked up, output remains constrained by persistent operating challenges and lagging momentum from earlier in the year.
- Supply Chains Under Pressure Again: The supplier deliveries index increased by 1.4 points to 56.4, likely reflecting delivery delays caused by the uptick in new orders. Some respondents also flagged regulatory factors as contributing to bottlenecks in July.
- Employment Declines Again: The employment index fell by 6.0 points to 43.7, reversing the improvement recorded in June. The decline highlights hesitancy among manufacturers to expand headcount amid fragile recovery in output and continued uncertainty around the strength of demand.
- Cost Pressures Begin to Re-Emerge: The purchasing price index rose by 1.2 points to 59.3, reflecting renewed upward pressure on input costs. Fuel price increases during July, ranging between 52c and 84c per litre, were a notable driver, although overall price levels remain at the second-lowest in over eight years.
- Forward-Looking Sentiment Softens: The index tracking expected business conditions in six months’ time dropped by 6.1 points to 56.4, down from 62.5 in June. Although still in optimistic territory, the decline signals rising caution among manufacturers amid global and domestic uncertainty, including volatile trade policy and regulatory risks.
The July PMI results signal a cautiously optimistic shift in the manufacturing sector. The return to expansion was driven by robust demand, but weak employment and persistent structural constraints suggest a full recovery remains fragile.