South Africa’s manufacturing PMI is still struggling, and although it increased somewhat, it is expected to remain sluggish.
Despite all the South African economic news that makes economists feel a little bit more upbeat about the country’s economic prospects, the manufacturing PMI is still letting growth slip through its fingers.
South Africa’s manufacturing Absa Purchasing Managers’ Index (PMI) recovered from weak levels at the start of 2026, driven by rising business activity and an uptick in domestic demand. However, Jee-A van der Linde, senior economist at Oxford Economics Africa, says the headline PMI remains in contractionary territory, with a lasting improvement not expected at this stage.
The seasonally adjusted manufacturing PMI rose by 8.2 points to 48.7 in January 2026, driven by broad-based month-on-month gains across the PMI subcomponents. Despite the sharp rise, the headline index has remained below the 50-point mark for four consecutive months, Van der Linde points out.
The business activity index moved back above the neutral level after a subdued fourth quarter, while the new sales orders index posted a strong recovery, driven entirely by domestic demand. Export sales, however, declined in January amid a stronger rand.
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Firmer rand hurting exports in PMI, but also reduces import and fuel costs
Van der Linde points out that the firmer currency is hurting export competitiveness, but it also reduces import and fuel costs, as the purchasing price index ticked higher in January but remained near multi-year lows.
It is also notable that the expected business conditions index ticked lower to 66.4, remaining above the 2025 average. Van der Linde says that, although manufacturers are upbeat about near-term conditions, respondents’ comments point to lingering hesitancy in the market.
Despite the low base, the January PMI readings point to an improved start to 2026, with the business activity index back in growth terrain, he says. “While the data suggests production may have increased in the first quarter of 2026, it is too early to confirm.”
ALSO READ: Absa’s PMI returns to contractionary territory after showing growth for one month
Manufacturing PMI likely to stay under pressure – economist
“Our overall view of the industry remains unchanged: the sector is likely to stay under pressure amid subdued domestic demand and US tariff disruptions. Furthermore, the baseline forecast is still that South African economic growth picks up to 1.5% in 2026, driven by a moderate lift in business investment, easier monetary policy that boosts consumer spending and resilient mineral export revenues.”
Absa’s economists say that, unlike in December, all subcomponents of the headline index looked better in January than in the previous month. Most notably, the business activity index entered growth territory.
“The remarkable recovery in the new sales orders index also stands out, particularly because it was driven entirely by domestic demand, given that export sales declined further in the month. Export sales values are likely to have been negatively affected by the stronger rand.
“After an unusually sharp decline in the inventories index in December, it rebounded to more normal levels in January, further supporting the headline PMI.”
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Encouraging that expected conditions did not deteriorate much in PMI
Absa also finds it encouraging that the expected business conditions index did not deteriorate much in January, although it edged lower from 68.8 to 66.4. “This remains almost 10 points above the average recorded in 2025 and suggests respondents expect a meaningful improvement in six months’ time.”
However, Absa says respondents’ comments suggest sustained hesitancy in the market, with more quotes being issued but few orders confirmed.
“While the strong rand exchange rate is a potential headwind for exporters, it is positive from a cost perspective as it lowers import costs and contributes to lower fuel prices. The purchasing price index edged up slightly in January but remained near multi-year lows.”
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