The Absa Purchasing Managers’ Index (PMI) declined slightly by 0.6 points to 44.7 points in February, remaining in contractionary terrain. This is the fourth consecutive contraction, as activity remains subdued.

The manufacturing sector has seemingly not picked up following its poor performance towards the end of last year, the report says.

The business activity index decreased by 2.9 points to 40.6 in February from 43.5 in January. This is a response to both a decline in demand and material input supply issues. Activity has returned to December levels, which had been 40.3 points.

New sales orders declined to 38.7 points from 42 in January, albeit up slightly from 37.4 in December 2024. Both domestic and export markets remain under pressure.

Further, export sales dropped significantly, falling deeper into contractionary territory mainly owing to lower-than-expected demand, global trade disagreements and logistical issues.

Meanwhile, the supplier deliveries index increased by 5.1 points to 55 points, indicating slower delivery times.

While the index has been surprisingly volatile in recent months, dropping to 49.9 in January from 56 in December, the uptick could be a concerning signal that supply chains remain constrained and that orders have slowed down, Absa notes.

In line with lower output, the employment index decreased by 2.3 points to 42.2 and remained in contractionary territory for the eleventh consecutive month.

A sustained recovery in activity is required for any improvements in employment to start coming through, the report emphasises.

Additionally, the inventories index ticked up slightly, to 46.9 from 46.5 in January. This could reflect some stocking up to meet demand should new orders recover in the short run.

The purchasing price index increased by 2.2 points to 70.4 in February.

Further, the rand exchange rate was relatively weaker in February, while some input material prices rose amid a higher Brent crude oil price. With the weaker rand, fuel prices increased for the fourth consecutive month in South Africa at the beginning of February, Absa says.

Possibly amid concerns about further cost pressure and the ability to pass this on, given weak demand conditions, the index tracking expected business conditions in six months’ time decreased further by 4.4 points to 60.5 in February.

Uncertainties about global trade dynamics continued, with some respondents flagging that increased tension in South Africa-US relations had specifically worsened their prospects. The return of loadshedding may have also weighed on sentiment, the report adds.