Manufacturing PMI falls to lowest level since April 2020 — bad news for GDP
Manufacturing PMI fell to its lowest level since the pandemic in May, signalling that the manufacturing sector remains under pressure after a poor start to 2025. This is not good news for the GDP statistics for the first quarter that will be announced on Tuesday, 3 June.
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.
According to the BER, the seasonally adjusted PMI decreased by 1.6 points to 43.1 in May 2025 from 44.7 in April and 48.7 in March.
Jee-A van der Linde, senior economist at Oxford Economics Africa, says the headline PMI remained in contractionary territory for a seventh consecutive month. 'This suggests that the manufacturing sector continued to suffer in May, despite some flickers of activity and demand improvement, albeit at extremely low levels. However, a decline in the supplier deliveries index pushed the headline PMI lower.'
ALSO READ: Manufacturing PMI for April shows deteriorating SA economy
Modest increase in business activity and sales orders
The business activity and new sales orders indices rose modestly in May, likely driven by an uptick in domestic demand as export sales continued to deteriorate rapidly, he says. The survey findings were inconclusive on whether the decline in the inverted supplier deliveries index was due to easing logistical constraints or lower demand. Meanwhile, the employment index continued to decline, remaining in contractionary territory for 14 consecutive months.
The index tracking expected business conditions in six months' time increased sharply to its highest level since the end of 2024. Van der Linde says the survey findings suggest that sentiment improved after global tariffs were suspended and businesses were hopeful that local political disagreements on policy within the government would be resolved.
ALSO READ: PMI down slightly with concerns about global trade uncertainty
How manufacturing slipped further in May
This chart shows how manufacturing PMI slipped further in May, pressured by soft local and international demand:
Source: BER
ALSO READ: This is where we would be if SA sustained an economic growth rate of 4.5%
PMI at lowest level since April 2020
Van der Linde says the headline PMI has fallen to its lowest level since April 2020, when it was 30.9, emphasising just how weak demand is for South African manufactured goods.
'The employment index has remained in contractionary territory for the past 14 months, as manufacturers continue to scale down production due to stagnant demand.'
He says the manufacturing sector is expected to weigh on first-quarter real GDP growth, and that looks likely to be the case in the second quarter as well.
'First-quarter economic data releases have been weak, pointing to 0% growth in the first quarter of 2025 compared to the fourth quarter of 2024. A quarterly contraction cannot be ruled out. Our below-consensus real GDP growth forecast for 2025 remains at 1.0%.'
This table shows the subcomponents of the Manufacturing PMI fared over the past three months:
Source: BER
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
TimesLIVE
2 hours ago
- TimesLIVE
Amid wrecking balls like Trump, ANC, here's how organisations can still thrive
With rising global and South African uncertainty, as US President Donald Trump upends global politics, trade and markets, and as the ANC battles to transform from the unilateral decision-making of one-party dominance to collaborative multiparty governance, threatening the life of the country's Government of National Unity, organisations, whether state, private or nonprofit, have to be resilient — able to thrive in adversity, to navigate these shocks and see opportunities in uncertainty...
Daily Maverick
4 hours ago
- Daily Maverick
South Africa's inflation target under review: Weighing risks and rewards for stability
Should South Africa lower its inflation target? Does inflation targeting work? And if so, what should the target be? After surviving yet another week of political turbulence and internecine bickering, South Africa's increasingly rickety coalition government might be about to face yet another thorny dilemma: the South African Reserve Bank's (SARB) push to lower the country's inflation target to below 3%, from the current band of 3-6%. Speaking on Monday, 30 June 2025, Reserve Bank Governor Lesetja Kganyago reiterated his argument for a lower inflation target, saying that the current rate undermined the value of the rand and contributed to persistent price increases. The SARB, along with the National Treasury, is 'almost done' completing a technical review of the inflation targeting framework and plans to submit recommendations to Kganyago and Finance Minister Enoch Godongwana shortly. 'Although an inflation rate of 4.5% may seem moderate, it still causes prices to double every 16 years,' Kganyago noted in the SARB's annual report. 'This is hard to reconcile with our constitutional obligation to safeguard the value of the currency. 'The main concern with South African inflation is not our ability to hit the target,' Kganyago said. 'Rather, it is that our target is high compared to other countries. For this reason, despite our success in stabilising inflation, the price level is almost 20% higher than it was in 2021.' The central bank currently aims to anchor inflation expectations at the midpoint of its 3-6% target, but this range is now under formal review. With May's inflation reading at 2.8%, Kganyago and his colleagues see an opportunity to lock in gains and update a framework that has remained unchanged since its introduction in 2000. 'Perfect opening for reform' David Fowkes, a member of the Monetary Policy Committee, recently called this moment 'amazing', suggesting that current low inflation levels provided the perfect opening for reform as they would minimise any potential transition costs, which might come in the form of momentarily higher interest rates. According to the bank's modelling, shifting to a 3% target would yield significant benefits, with inflation expectations declining quickly while 'borrowing costs would fall more significantly' compared with the SARB's baseline forecast. Behind the push is a clear driver: investor appetite. Global asset managers have been pressuring the government to support the SARB's plan in the hopes that a lower target would permanently reduce bond yields and lending rates. South African bonds and the rand have both strengthened recently, with South African borrowing costs at a three-year low, partly on expectations and hopes that the Treasury will approve the new target by early next year. According to insiders, hedge funds and portfolio managers are actively lobbying the Treasury, advising a cautious transition to manage market impact and the inevitable political fallout. And there is some merit in the proposal. South Africa's base interest rate keeps the prime lending rate near 11%, with 10-year bond yields around 10%. These rates are at least partly elevated because of the high upper bound of the inflation target. It is for this reason that other emerging economies, like Brazil, have already lowered their targets — from 4.5% to 3% — with a 1.5% tolerance range. It is clear that international investors would like to see an emerging market like South Africa fit into what they see as global monetary policy best practice. Yet despite these compelling arguments, there are three issues with changing it that the SARB is either missing or conveniently ignoring. First, it is politically toxic. Lowering the inflation target would be further ammunition for the ANC-led government to suppress wage growth in the public sector and restrain price hikes by state-owned enterprises and municipalities. Public sector unions, which of course dominate all critical wage negotiations, rely heavily on past inflation data and expectations — which are largely driven by the inflation target — to argue for increases. There have even been recent calls from the academic community on why South Africa should actually be looking at raising the target threshold, not lowering it. The factions of the ANC who are not aligned with the Treasury, which has consistently been viewed as 'neoliberal', will be spoiling for a fight. Second, moderate inflation is one of the few tools available for reducing public debt. For an emerging market with high debt-to-GDP like South Africa, a bit of inflation is critical to 'inflate away' liabilities. A lower target would negate this effect, making debt consolidation even harder and potentially putting more pressure on the Treasury to cut spending at a time when the economy needs all the stimulus it can get. This could, theoretically, have adverse consequences for growth. Importance overstated Finally, the long-term importance of the inflation target is overstated. While financial markets might care about the level of the target, its long-term effect on economic fundamentals is minimal. The actual target itself is essentially random. The first economists who devised inflation targeting in New Zealand in the 1980s knew this — it is essentially a pragmatic and political decision as to what you make the target, not an economic one. What matters more is whether inflation expectations are well anchored and consistent, and then of course whether wages rise in tandem with prices. On that latter point, South Africa has clearly fallen short. Wage growth, especially outside the public sector, has consistently lagged inflation since the global financial crisis. The gap widened sharply during the Zuma-era stagnation and the Covid-19 pandemic. Rising food and transport costs, load shedding-related expenses and record-high unemployment have meant that even with inflation near historic lows most South Africans feel worse off than ever. For this reason, the debate is a red herring. The SARB should quit listening to the demands of the investor community and rather stick to its job of keeping prices in line with expectations. If the economy was being properly managed by the government and creating private sector jobs — which would mean more people being paid a decent salary — then we would not be having this debate in the first place. DM
Daily Maverick
8 hours ago
- Daily Maverick
After the Bell: Should you wait an age before retiring?
I'm at a stage of life where I'm very interested in the people in my field who are older than me, how they prolong their careers and what happens to people who stop working. There is a phrase that people have used for many years on football fields about whether you can put a very young player on the field for a big game. They'll say, 'If he's good enough, he's old enough.' But 'if you're good enough, you're young enough' doesn't seem to apply. So many companies have mandatory retirement ages, or ages at which you have to leave. A few months ago, I was in a workshop, plonked on a stool, trying to recover from the cost of a new set of tyres. Behind me, a woman was telling the receptionist, obviously a long-term acquaintance, how angry she was that her company had retired her. She was financially secure, but she clearly felt that a big part of her life was being taken from her. I have huge sympathy for her. I mean, my work is such a big part of my life, and I imagine it is, or was, a big part of yours. Financial needs Because of the nature of our society, you might be in a position where you still need to financially help your children or your grandchildren, or simply a younger member of your family. There may be many people who still rely on your salary even though you are now in your sixties. Last week, Standard Bank announced that it was raising its retirement age for executives from 58 to 63. There is a wonderful Game of Thrones context to this. The current CEO, Sim Tshabalala, who has shown himself to be a hugely effective leader (if you ever get a chance to sit next to him at lunch, take it), is 58. Previous deputy CEO Kenny Fihla is roughly the same age, and it seems one of the reasons he took the job of Absa CEO was that he believed he would never get the job at Standard Bank. Legally, your retirement age is included in your employment contract. This means that companies can change these contracts (so long as you agree) if they choose to. But it also means that when you sign a contract, you need to check the fine print. And when you are joining a company, looking at the retirement age probably comes quite a long way after trying to understand how on Earth your medical aid is going to work. I do wonder what goes into a decision about a company's retirement age. I think some companies want to have a mechanism to ensure they can remove people who are getting on a bit. Not everyone can still do a job well in their 60s. And some jobs are not appropriate for people in a later stage of life. I mean, one of the problems in our army is that too many of the soldiers, the people who should actually be doing the fighting, are too old. The average age of our infantry soldiers is 39. Age diversity The other thing that firms need to manage is age diversity. If you have a group of people of just one generation making decisions, you will make mistakes. The world is changing very quickly at the moment. I might have grown up waiting for TV to start at 5:30 every afternoon, but my children have TVs on their person at virtually all waking hours. One of the big mistakes the ANC has made in government is keeping too many people in Cabinet for too long. And this has led to them making huge mistakes along the way. They simply have not understood how the country, and the world, have changed. It's also led to a very large group of slightly younger people who have not been able to move through the ranks. As a result, you end up with congestion in the middle sections of the party (in the provinces). This leads to even more congestion in councils and local government. If there is no prospect of moving up, you will stay and build your empire there. This can happen in companies, too, if you're not careful. So you do need to have a mechanism that allows people to move up. And to do that means your mechanism also needs to allow them to move out. But, you also need to find a way to keep people if they are still adding value. Pick n Pay brought back Sean Summers at the age of 72 to try to help the company out of a massive jam. He is certainly helping the retailer sell a lot more marmalade. This gets to the crux of it. If you still bring more value than other people would to the same job, I think it might be wrong to force you to retire. But at some point, and this happens to all of us, it does become time to stop working. There is part of me, not a big part, but a part nonetheless, that just can't wait.
