The seasonally adjusted Absa Purchasing Managers’ Index (PMI) declined marginally from 47.3 to 46.8 in July, signalling another month of contraction.
However, the headline decline arguably overstates the weakness in manufacturing conditions.
Domestic demand improved, lifting new sales orders and supporting a second consecutive monthly increase in business activity. At the same time, easing cost pressures continued to provide relief, although subdued confidence and weak export demand remain key challenges for the sector.
Key highlights from the April 2026 PMI include:
- Business activity continues to recover: The business activity index increased for a second consecutive month, rising from 45.6 in June to 48.8 in July. Although production remained below the neutral 50-point mark, the steady improvement since May suggests manufacturing output entered the third quarter on a firmer footing than implied by the headline PMI. Improved domestic demand appears to have supported this recovery.
- Domestic demand supports new sales orders: The new sales orders index recovered almost all of June’s losses, increasing from 40.6 to 44.1. The improvement appears to have been driven entirely by stronger domestic demand, while export sales deteriorated sharply during the month. Respondents’ feedback remained mixed, with some reporting stronger demand while others described trading conditions as the weakest in over a year, suggesting the recovery is uneven across manufacturers and far from broad-based.
- Supplier deliveries point to improving supply chains: The supplier deliveries index declined by 4.5 points to 55.5. While lower supplier deliveries would normally point to weaker demand, that interpretation may not hold in the current environment as supply chains continue to normalise. As the supplier deliveries index is inverted, faster deliveries lowered the headline PMI but may instead reflect easing logistical constraints. Recent data suggests activity through the Port of Durban has improved, although Cape Town harbour continues to underperform.
- Inventories continue to decline: The inventories index declined further from 49.0 to 43.2 following June’s sharp drop. This suggests purchasing managers remain reluctant to replenish raw material and intermediate goods inventories. While this could reflect uncertainty over whether stronger demand will persist, some firms may also be delaying purchases in anticipation of further declines in input costs.
- Employment remains weak: The employment index edged up marginally from 41.4 to 42.2 but remained well below the neutral 50-point mark. The reading is broadly in line with the average recorded so far in 2026 and suggests manufacturers remain reluctant to expand payrolls despite the modest improvement in activity.
- Input cost pressures continue to ease: The purchasing price index declined further from 71.3 to 67.2, indicating that the pace of input cost increases continued to slow following June’s sharp moderation. While this suggests the worst of the recent oil price shock has likely passed, cost pressures remain elevated relative to the pre-war period. The increase in diesel prices later this week, together with recent rand weakness, could place renewed upward pressure on imported input costs in the months ahead.
- Business confidence deteriorates: The index tracking expected business conditions over the next six months declined from 56.6 to 49.3, falling back below the neutral 50-point mark. The renewed escalation of tensions in the Middle East, together with higher oil prices following June’s lows, likely contributed to the deterioration in sentiment. The decline also suggests manufacturers remain cautious about the durability of the recent improvement in activity.
The July PMI results suggest that South Africa’s manufacturing sector entered the third quarter on a firmer footing than the headline PMI indicates. Improvements in domestic demand, production and easing input cost pressures point to gradually improving underlying conditions.
However, weak export demand, subdued business confidence and continued inventory drawdowns indicate that manufacturers remain cautious and that the recovery is not yet broad-based.