South Africa’s manufacturing sector remained under pressure in July as weak export demand and renewed geopolitical tensions dampened business confidence, even as domestic demand and factory output showed signs of recovery.
The Absa Purchasing Managers’ Index (PMI), compiled by the Bureau for Economic Research, slipped to 46.8 in July from 47.3 in June, marking a second consecutive month below the 50-point threshold that separates expansion from contraction. It was the lowest reading in seven months.
The decline reflected growing concerns among manufacturers over weaker international demand and the impact of escalating tensions in the Middle East, which have pushed up oil prices and increased uncertainty over the global economic outlook.
Despite the weaker headline reading, underlying indicators pointed to improving conditions within the sector. The business activity index rose for a second straight month to 48.8, while the new sales orders index climbed to 44.1 from 40.6, driven largely by stronger domestic demand.
Export orders, however, continued to weaken, highlighting the uneven nature of the recovery. Manufacturers also remained reluctant to rebuild inventories, with the inventories index falling to 43.2, suggesting businesses remain uncertain about whether recent improvements in local demand can be sustained.
Confidence in the sector deteriorated sharply. The index measuring expected business conditions over the next six months dropped to 49.3 from 56.6 in June, slipping back into contraction territory as firms assessed the risks posed by higher energy costs and geopolitical instability.
Cost pressures continued to ease during the month. The purchasing price index declined further, indicating that the worst effects of the recent oil price shock may have passed. However, manufacturers warned that higher diesel prices and a weaker rand could renew pressure on production costs in the coming months.
Economists said the July survey painted a more balanced picture than the headline PMI suggested. While factory activity remains in contraction, stronger domestic demand, improving production and easing input costs indicate that conditions are stabilising. The sector’s recovery, however, is expected to remain fragile until export demand strengthens and businesses regain confidence in the economic outlook.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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