Carnage: Absa PMI falls in December to lowest level since pandemic

The Absa Purchasing Managers’ Index (PMI), a key gauge of confidence in the manufacturing sector, fell in December to its lowest levels since the pandemic – a flashing red light from an ailing economy.

The drop was small – 1.5 points – but the 40.5 points it reached was the lowest since April 2020, Nkosiphindile Shange, an economist at the Bureau for Economic Research (BER), told Daily Maverick. The level it reached then, when the economy was melting down under the crushing weight of hard lockdowns, was 30.8 points.

The index ranges from 0 to 100, so anything below 50 is considered negative territory and a signal of a contraction in South Africa’s manufacturing sector. The PMI is the product of a monthly survey of purchasing managers in the manufacturing sector conducted by the BER.

“It is important to note that an unusually sharp decline in the inventories index, as well as a steep decline in the employment index, were the main drivers of the weaker headline reading,” Absa pointedly said in a statement with the PMI release.

“New sales orders were barely changed from November and remained at a subdued level, while business activity actually improved sharply during the month, albeit remaining below the 50 mark. The headline PMI thus signals that conditions in the sector remained tough, but activity may have improved nonetheless.”

Absa also noted that the index tracking’s “expected business conditions in six months’ time” soared 18.1 points to 68.8 in December, its highest level since September 2024 – an indication that improvement is strongly expected on the horizon.

The BER’s Shange also noted unusual factors such as Cape Town harbour closing for 16 days during the period because of high winds – underscoring the impact that the weather can have on the economy in unexpected ways.

Still, the bottom line is that the read is a dismal one and it points to a troubled manufacturing sector – one of the key engines of growth for the South African economy.

“The fourth-quarter PMI average of 43.9 marks a sharp decline from the 49.9 recorded during the preceding quarter and the lowest for 2025. Seasonally adjusted manufacturing output has disappointed thus far in Q4 2025, as South Africa’s manufacturing sector continues to experience strain due to weak domestic demand and the impact of US import tariffs,” said Jee-A van der Linde, senior economist at Oxford Economics Africa.

“We do not anticipate a meaningful improvement in the near term,” he added.

This bodes ill for South Africa’s fourth-quarter (Q4) gross domestic product (GDP) read and overall growth for 2025 – and going forward. It seems almost certain that the manufacturing sector will show a contraction in the fourth quarter, making it a drag on the overall number.

Most forecasts for South African GDP growth for 2025 are in a 1.0% to 1.3% range. Judging from the PMI, even these tepid projections may prove optimistic unless other sectors step up to the plate. DM