South Africa’s manufacturing activity remained in contractionary territory, the Absa Purchasing Managers’ Index (PMI) has shown, registering a decline of 1.9 points to 46.2 points in December.

This puts the 2024 fourth quarter average PMI at 49 points, not significantly different from 49.8 points in the third quarter, but above the 47.8  in the first quarter and 48.1 points in the second quarter.

The manufacturing sector experienced a volatile 2024, with this second consecutive monthly decline in December reversing the upward momentum seen in September and October.

The business activity index decreased by 8.7 points to 40.3 in December.

The pullback in production came on the back of a sharp fall in demand.

The new sales orders index fell to 37.4 points from 45.9 in November.

Of concern, some respondents noted that conditions in December 2024 were worse than usually seen in this period.

In addition, export sales dropped sharply and fell back to levels last seen in the first half of 2024.

The supplier deliveries index rose to 56 points, increasing by 7.7 points and moving above 50 points for the first time in three months.

With production and orders being significantly weaker, higher demand for supplies is unlikely to be the cause of the delays (with the inversed index increasing when deliveries are slower, as this is normally seen as a positive sign with manufacturers competing for supplies), Absa points out.

It notes that logistical issues remain, both locally and in the global markets, which is posited to have been the likely cause of a slowdown in delivery times.

The employment index decreased by 0.4 points to 46.5 and remained in contractionary territory for the ninth consecutive month.

Owing to volatility and largely depressed activity, the employment index has been below the neutral 50-point mark for eleven of the twelve months.

The purchasing price index fell by 1.3 points to 60.4 in December.

Absa highlights this as “surprising”, given that the rand exchange rate was relatively weaker in December, while fuel prices and liquified petroleum gas increased at the beginning of the month.

The most positive outcome of the PMI was that the index measuring expected business conditions in six months’ time increased by 5.2 points to 67.6 in December, which Absa says indicates that manufacturers remain optimistic about business conditions in the future.