The seasonally adjusted Absa PMI declined from 46.8 to 45.8 in August, marking its lowest reading so far in 2026 and a fourth consecutive month-on-month decline.
The deterioration was driven by a sharp fall in factory activity and a renewed weakening in new orders, with the loss of momentum appearing to come primarily from domestic demand rather than exports.
Key highlights from the August 2026 PMI include:
- Factory Output Takes a Sharp Knock: The business activity index fell by 8.6 points to 40.2, its weakest reading of the year. The decline represents a sharp reversal from July’s improvement and signals a significant deterioration in factory output. For manufacturers, this points to a sector that entered the latter part of the third quarter with considerably less production momentum than it had just a month earlier.
- Domestic Demand Drives the Pullback in New Orders: The new sales orders index fell from 44.1 to 40.3, giving up the ground recovered in July. Importantly, export sales appeared somewhat less weak during the month, suggesting that the renewed deterioration in demand was largely domestically driven. Respondents pointed to subdued consumer demand, weak confidence and particularly soft spending on non-essential goods – highlighting the pressure manufacturers continue to face from cautious household and business spending.
- Factory Employment Improves, but Job Shedding Continues: One of the few encouraging developments came from the employment index, which rose from 42.2 to 46.2. While the reading remained below the neutral 50-point mark and therefore still signals declining factory employment, the improvement suggests that the pace of job shedding slowed during August. This provides a degree of resilience against the otherwise weaker activity picture.
- Inventory Levels Remain Low as Manufacturers Hold Back: The inventories index was broadly unchanged at 43.6, remaining well below the neutral 50-point mark. Manufacturers therefore continued to run down stocks of raw materials and intermediate goods rather than rebuild them. In the context of weak demand, this suggests purchasing managers remain cautious about committing to higher inventory levels while order books remain subdued.
- Supply-Chain Pressures Re-emerge: The supplier deliveries index increased from 55.5 to 58.6, indicating longer delivery times. Although a higher reading mechanically supports the headline PMI because the index is inverted, the increase does not appear to reflect stronger demand. Respondents instead cited container shortages, limited shipping space and renewed congestion at Durban harbour, pointing to renewed logistical pressure across manufacturing supply chains.
- Input Cost Relief Stalls: The purchasing price index remained unchanged at 67.2 after declining substantially from its May peak of 84.8. Higher diesel and international oil prices added to manufacturers’ costs during August, while rand strength helped offset some of the pressure on imported inputs. Rising freight and delivery costs were also highlighted by respondents. With diesel prices expected to rise again in September, manufacturers are likely to continue facing elevated cost pressures even as the earlier oil-price shock has moderated.
- Manufacturers Look Beyond the Current Weakness: Despite the deterioration in current conditions, the index tracking expected business conditions in six months’ time rebounded from 49.3 to 54.7, moving back above the neutral 50-point level. This is an important counterweight to the weak headline data and suggests manufacturers may view the current downturn as temporary. However, the gap between stronger expectations and sharply weaker production and orders means the recovery manufacturers anticipate has yet to show up meaningfully in current activity.
The August PMI therefore presents a two-speed picture of the manufacturing sector. Current operating conditions deteriorated materially, with factory output and domestic demand coming under renewed pressure, while supply-chain constraints and persistent input costs added to manufacturers’ challenges.
At the same time, the improvement in employment and the rebound in six-month expectations suggest businesses have not abandoned hopes of a recovery. The key question is whether that confidence can translate into stronger domestic demand, firmer order books and a sustained recovery in production over the remainder of 2026.