The Absa Manufacturing Survey decreased by ten points to 23 in the third quarter – its lowest level since the first quarter of 2024, with Absa noting that overall business confidence in the sector remains under severe pressure, despite notable gains in sales and production activity in certain subsectors.

While manufacturers of consumer and capital goods within industries such as transport, food and furniture recorded meaningful improvements in sales and production activity, manufacturers of intermediate goods – including inputs used in the metals sector – reported significant declines in confidence levels.

“The impact of US tariffs, the ongoing reconfiguration of supply chains and geopolitical tensions undoubtedly had an impact on manufacturer confidence during the quarter. Rising electricity costs, growing competition from cheaper imports and challenges within the steel industry also impacted producer sentiment,” says Absa Business Banking manufacturing sector specialist Sachin Chanderdhev.

Conducted between August 6 and 25 in partnership with the Bureau for Economic Research at Stellenbosch University, the survey reflects feedback from about 700 manufacturing businesses. The confidence index ranges from 0 (no confidence) to 100 (extreme confidence).

Domestically, manufacturers demonstrated resilience, with encouraging improvements across key indices. Domestic and export sales improved by 25 and 9 index points, respectively, and the overall production index increased by 14 points. Similarly, new domestic and export orders increased by 18 and 8 index points, respectively, suggesting manufacturers are preparing to meet expected demand following interest rate cuts and seasonal peaks.  

A notable improvement in sentiment was recorded in the transport subsector, where confidence surged by 34 points (from three points in the second quarter), supported by stronger new sales orders. “While this rebound seems somewhat counterintuitive, it was likely driven by some front loading of orders ahead of the full tariff impact,” says Chanderdhev.

“Sustained growth will depend on the ability of manufacturers in this industry to pass on the increased costs in the short term, the diversification of markets over the longer term and domestic demand.”

Despite the challenging environment, a few encouraging developments have emerged. A stronger rand, declining oil prices, a further 25-basis point interest rate cut, improving consumer confidence, favourable credit conditions and a steady recovery in disposable income have helped ease demand side pressures for manufacturers. The factors gave rise to a healthy increase in the confidence, sales and orders received within the consumer goods sector.

Despite these positive signs, the survey highlights significant risks over the next 12 months – expectations for business conditions, trade volumes and investment remain weak and global demand seems fragile.

“It is critical for key role-players within the manufacturing sector to work together to build and strengthen regional and global value chains,” Chanderdhev adds.

Encouragingly, manufacturers are investing in resilience measures such as renewable energy, energy-efficient machinery and water security solutions. These efforts aim to reduce costs, mitigate risks and enhance competitiveness. While uncertainty persists, it is encouraging to see businesses adopting cost-saving innovations to strengthen their continuity and improve their competitive positioning,” he says.