Absa PMI increases but in contractionary territory for eighth consecutive month

The Absa PMI increased in June by 5.4 points to 48.5, but the headline PMI remained in contractionary territory for the eighth consecutive month, although it is encouraging to note that the current level is the second highest in 2025 after the 48.7 points in March.

The 5.4-point increase is also the highest increase since the 9-point jump between August and September last year.

The Absa Purchasing Managers’ Index (PMI) is an economic activity index based on a survey conducted by the Bureau for Economic Research (BER) and sponsored by Absa.

On the positive side, new sales orders increased by 7.8 points to 46.1 in June, signalling some recovery in demand according to the BER. While export sales recovered somewhat in June compared to May, volumes remain near the lowest levels seen this year.

The BER says this suggests that domestic demand boosted the large recovery in total new sales orders. However, the improvement in demand failed to boost production as the business activity index decreased by 1.5 points to 41.9 points in June.

ALSO READ: Manufacturing PMI for April shows deteriorating SA economy

Supplier deliveries and employment in Absa PMI increased

The supplier deliveries index increased by 6 points to 55.1 in June. The BER says this indicates that the delivery times were extended due to some delays, possibly due to the uptick in orders and suppliers becoming busier, as respondents did not mention any significant supply bottlenecks.

The employment index increased by 9.7 points in June, reaching 49.7 points, the highest since March 2024. The BER says this is a big jump for this index, but it needs to be sustained for some months before we can be confident that the manufacturing sector is adding jobs at a significant pace.

The purchasing price index continued its downward trajectory, decreasing by 2.3 points to 58.1 in June. The BER points out that despite some volatility, the rand was on average 40c stronger to the dollar in June than in May and stayed below R18/$ for a large part of the month.

On average, the Brent crude oil price was higher in June than in May, but the decline in diesel prices at the start of June likely helped.

The index tracking expected business conditions in six months’ time was unchanged at 62.5 points in June, after a significant 13.9 points increase in May. The BER says the apparent end to the 12-day war between Israel and Iran may have helped ease nerves, with no further news on the global tariff front.

ALSO READ: PMI down slightly with concerns about global trade uncertainty

Manufacturing activity remains weak

Jee-A van der Linde, senior economist at Oxford Economics Africa, says despite the fact that South Africa’s manufacturing PMI recovered partially in June driven by a mild improvement in demand, overall manufacturing activity remains weak, with the second-quarter PMI average lower on a quarterly basis at 45.4, below the previous quarter’s 46.2.

He says this suggests that a quarterly contraction in the manufacturing sector is also likely for the second quarter.

Van der Linde also points out that despite the increase in the new sales orders index, his improvement failed to boost production as the business activity index declined and although the employment index increased strongly, it remains to be seen whether this momentum can be sustained and translate into sustainable job creation.

This chart shows that the second quarter average of 45.4 is lower than the 46.2 average at the start of 2025:

PMI must make up for poor performance in first quarter in second quarter

He says, after a poor performance in the first quarter, the manufacturing sector must make up considerable ground in the second quarter.

“Although actual production increased by 1.9% compared to April, factory output levels were still 6.3% lower than last year, with the May manufacturing PMI number indicating activity remained sluggish due to muted demand.

“When factoring in the June PMI numbers, it is evident that the second-quarter average is lower than the preceding three-month period. This aligns with our overall view for the South African economy, which is that general activity is unlikely to have improved from the start of the year.”

ALSO READ: SA business activity runs out of steam at end of 2024, but not all bad — PMI

This table shows that despite a broad improvement in June, the PMI remains stuck in contractionary territory: