South Africa’s manufacturing sector experienced a further deterioration in August, with weaker domestic demand weighing on new orders and business activity and pushing the country’s manufacturing sector deeper into contractionary territory.
The seasonally adjusted Absa Purchasing Managers’ Index (PMI) fell to 45.8 in August from 46.8 in July, marking its fourth consecutive monthly decline and its weakest reading of 2026. A PMI reading below 50 indicates a deterioration in manufacturing conditions compared with the previous month, while a reading above 50 indicates an improvement.
The index is compiled by the Bureau for Economic Research (BER) and sponsored by Absa. It is a survey-based indicator of manufacturing conditions and should therefore be distinguished from official measures of industrial production.
The August reading extends a deterioration that followed a brief improvement earlier in the year. The PMI stood at 52.6 in April before declining to 50.8 in May, 47.3 in June, 46.8 in July and 45.8 in August. The sequence suggests a loss of momentum rather than a one-month disruption.
The sharpest deterioration was recorded in the business activity index, which fell to 40.2 in August from 48.8 in July. It was the lowest level recorded during 2026 and points to a substantial decline in reported activity among surveyed manufacturers.
The new sales orders index also weakened, falling to 40.3 from 44.1 in July. The decline reversed the modest improvement recorded during the previous month and indicates that manufacturers continued to face difficulties securing sufficient demand.
The weakness was concentrated largely in the domestic market. Manufacturers reported subdued demand, fragile consumer confidence and reduced spending on non-essential goods. Export sales, by contrast, showed some improvement, providing a limited counterweight to weaker conditions at home.
The distinction is important for understanding the position of South African manufacturing within the wider African economy. South Africa has one of the continent’s most diversified industrial bases and is deeply integrated into regional and international supply chains. Changes in domestic demand can therefore influence manufacturers’ production decisions, employment and investment, while access to external markets can provide an alternative source of demand for companies able to compete internationally.
Employment conditions remained under pressure. The manufacturing employment index increased from 42.2 in July to 46.2 in August, indicating that the pace of contraction moderated but that employment in the sector continued to decline.
The inventories index remained subdued at 43.6, suggesting that manufacturers continued to exercise caution over stock levels amid uncertain demand. Purchasing activity also remained below the neutral threshold, although there were indications of some improvement from the previous month.
Against this backdrop, manufacturers became more optimistic about the medium-term outlook. The index measuring expected business conditions six months ahead increased to 54.7 from 49.3, moving back above the 50-point threshold.
That improvement introduces an important qualification to the weakness evident in the headline PMI. While manufacturers reported deteriorating conditions in August, their expectations suggest that some businesses regard the current slowdown as temporary rather than the beginning of a sustained industrial contraction.
Expectations, however, are not the same as realised economic activity. The improvement in sentiment will need to be accompanied by stronger orders and production before it can be regarded as evidence of a broader manufacturing recovery.
The August figures also illustrate the importance of distinguishing between different aspects of industrial performance. A decline in the PMI does not necessarily mean that South Africa’s total manufacturing output has fallen by the same magnitude. The PMI is designed to capture the direction and pace of change in business conditions based on responses from manufacturing companies.
For the wider Southern African region, developments in South Africa remain significant because of the country’s role as a major industrial, financial and trading hub. Manufacturing supply chains extend across national borders, with firms in neighbouring economies supplying raw materials, components, agricultural products and services into South African industries.
At the same time, the region’s economic relationship with South Africa is not one-directional. South African manufacturers also depend on markets elsewhere in Africa, while regional businesses increasingly seek to build their own productive capacity and participate in cross-border value chains.
The latest PMI therefore needs to be viewed within a broader African economic context. Weak household demand in South Africa can constrain industrial activity, but opportunities in regional trade, exports and infrastructure investment could provide avenues for manufacturers to diversify their sources of growth.
The immediate picture nevertheless remains challenging. The combination of a 45.8 headline PMI, a business activity index of 40.2 and a new orders index of 40.3 indicates that manufacturers faced significant pressure during August.
The more optimistic six-month outlook offers a counterpoint, but whether that confidence translates into higher production, employment and capital investment will depend largely on the recovery of demand and the operating environment facing businesses.
For now, the August PMI points to a South African manufacturing sector losing momentum at a time when domestic consumption remains subdued. The coming months will determine whether the deterioration represents a temporary phase or the beginning of a more persistent period of industrial weakness.
Source: Bureau for Economic Research (BER) and Absa Purchasing Managers’ Index.
