The seasonally adjusted Absa Purchasing Managers’ Index (PMI) declined by 1.4 points to 49.5 points in August and returned to contractionary territory.

This partially reversed the 2.3-point improvement in July, when the PMI edged into expansionary territory for the first time in nine months, says Absa, adding that activity in the sector remained subdued, with both domestic and export demand remaining sluggish.

It adds that it is, however, noteworthy that the average PMI for the third quarter is currently 50.2 points (September outstanding), compared with the 45.4 recorded for the second quarter.

Following a significant and somewhat unexpected surge in sales in July, new sales orders once again declined, by 8.5 points to 47.4 in August. Prior to July, the last time new sales orders had been in expansionary territory was in October 2024.

"Both domestic and global demand remain under pressure. Respondents refer to tariffs hurting exports, even if they themselves are not directly impacted, some mention knock-on implications of impacted clients," Absa points out.

The business activity index declined by 1.3 points to 45.8 points in August, remaining in contractionary territory for ten consecutive months. "Respondents again noted increased competition from cheaper imports," Absa notes.

The supplier deliveries index decreased by 3.5 points to 53 in August. The decrease is likely due to declining orders, not as a result of improvements on the logistical front, the bank comments.

"Surprisingly, the employment index increased by 5.2 points in August, reaching 48.9. Still, given the challenging trading environment and constrained demand, employment has remained below the 50-mark for a year and a half. Only sustained improvements in activity can have a significantly positive effect on employment," it added.

The purchasing price index decreased slightly by 0.8 points, edging to 58.5 in August, signalling some relief on the input cost front. The rand was relatively stronger in August, staying below R18 to the dollar throughout the month, reaching R17.40 to the dollar in mid-month, compared with R18.19 to the dollar on July 31.

Despite some volatility, the crude oil price was largely flat at an average level.

The index tracking expected business conditions in six months’ time improved slightly from 56.4 in July to 56.8 in August. "Given the increasingly difficult trading environment, it is encouraging to see some stability in the index," Absa states.