South African Manufacturing Sector Struggles with Weak Demand and Higher Input Costs

The manufacturing sector in South Africa continues to struggle with weak demand and higher input costs. The Absa purchasing managers' index (PMI) declined for the fourth consecutive month, reaching its lowest level this year at 45.8 points from 46.8.

The PMI's business activity index fell 8.6 points to 40.2, a sharp deterioration that is mainly due to weak demand and higher input costs. The sector has been grappling with these issues since the start of the year, including more expensive fuel as a result of the US-Iran war disrupting global oil supply.

South Africa is a net importer of crude oil and petroleum products, making it vulnerable to fluctuations in global oil prices. Factory production contracted in the first half of this year, and Stats South Africa's GDP report next week is likely to reflect the continued strain on the manufacturing sector.

The PMI survey also showed that new sales orders fell to 40.3 from 44.1 points, while export sales were somewhat less weak than the previous month. This suggests that the renewed deterioration in demand was largely domestically driven.