South Africa's manufacturing sector faced a significant downturn in August as factory output decreased by 4.3% compared to the same period last year. This occurred amid weakening consumer demand and reduced business confidence.
According to data from Statistics South Africa (Stats SA), production fell by 4.3% year-on-year, which is a deterioration compared to the 1.1% growth recorded in July. This figure was below market expectations of 0.4% growth and was accompanied by a monthly contraction of seasonally adjusted production by 3.1%.
Investec economist Lara Hodges noted that this result aligns with the weakness observed in the Absa Purchasing Managers' Index (PMI) in August, when the index dropped to 45.8 points. The PMI, compiled by the Bureau for Economic Research (BER), indicated a decline in business activity and new orders, with manufacturers reporting weak demand, low consumer confidence, and slowing spending on non-essential goods.
Lara Hodges emphasized that the outcome was significantly below consensus forecasts, adding that manufacturing confidence remains low due to insufficient demand and growing concerns about the overall business environment. The drop in August was widespread; only the textile, apparel, leather, and footwear subsector showed growth compared to last year.
The petrochemical products, rubber, and plastics segments contributed most to the decline, shrinking by 5%, which reduced the overall production result by 1.1 percentage points. Basic chemicals showed particular weakness, falling by 19%. A significant decrease was also recorded in the motor vehicles, parts, and other transport equipment segment—down 8.8%, while the food and beverages and basic steel, non-ferrous metals, metal products, and machinery sectors saw a drop of 3%.
This slump comes against a backdrop of broader slowdown in the manufacturing sector: in the second quarter of this year, the sector contracted by 1.8%, contributing to an overall economic contraction of 0.2% during that period. However, some positive trends emerged at the beginning of September. The Absa PMI rose by 4.9 points to 50.7, returning above the 50-point threshold that separates expansion from contraction after three consecutive months below this level. New orders increased sharply, and business activity recovered much of its August slump.
Nevertheless, Hodges pointed out that manufacturers continue to face heightened uncertainty, particularly regarding rising raw material costs and the impact of the Middle East conflict on profitability.