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Manufacturing activity sank for the fourth consecutive month in August, reaching the weakest level this year, dragged down mainly by soft domestic demand and persistent cost pressures that can largely be traced to the impact of the US-Iran war on oil prices.The Absa purchasing managers’ index (PMI) — a measure of economic activity derived from a survey conducted by the Bureau for Economic Research (BER) — declined to 45.8 points from 46.8 in July.This was the third straight month that the index has registered below the neutral 50-point mark, which separates expansion and contraction.The headline PMI is calculated as a weighted average of several subindices, including business activity, new orders, employment, supplier deliveries and inventories. In August, business activity deteriorated sharply, with the index falling 8.6 points to 40.2.New sales orders gave up July’s gains, falling to 40.3 from 44.1 points. Export sales appeared somewhat less weak than the previous month, suggesting that renewed muted demand was largely domestically driven.Cost pressures remained elevated, with the purchasing price index unchanged at 67.2 points after declining significantly from its May peak of 84.8.(Dorothy Kgosi) The August report points to continued strain in the manufacturing sector, which is grappling with weak demand and higher input costs, 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.Factory production contracted in the first half of this year and is likely to be a dampener on overall economic output in the second quarter of 2026. Stats SA will release the GDP report next week.“Comments from respondents similarly pointed to subdued demand, weak consumer confidence and particularly soft spending on non-essential goods,” Absa said.“Higher diesel and international oil prices added to costs during the month, while a stronger rand provided some relief on imported inputs. Respondents’ comments also pointed to higher freight and delivery costs.”Fuel price hikesFuel prices are set to rise again on Wednesday, with the pump price of 95-grade petrol climbing R1.34 to R26.92 a litre in Gauteng, while the wholesale cost of diesel will jump by R2.95 and R3.15 for 0.05% sulphur grade and 0.005% sulphur grade, respectively, to as high as R29.11 a litre.The employment index in the PMI rose to 46.2 points in August from 42.2 but was still below the neutral 50-point mark, signalling that factory employment is on the decline, albeit at a slower pace than previously.The supplier deliveries index rose from 55.5 points to 58.6, though this appeared to reflect slower deliveries rather than stronger demand. Several respondents in the survey reported container shortages, limited shipping space and renewed delays at Durban harbour.One positive in the report was that the outlook for business conditions over the next six months improved, with the index measuring expected business conditions moving back into expansionary territory by adding 5.4 points to 54.7.But overall, nothing in the latest PMI data suggests a meaningful rebound for the sector in coming months, Absa economists Andiswa Nondudule and Miyelani Maluleke wrote in a separate note.“With manufacturing output having already declined for four straight quarters to the second quarter, the sustained weakness is a clear concern for performance in [the third quarter],” they said.Business Day
