South African Manufacturing Conditions Remain Depressed, but PMI Shows Slight Improvement in March

South Africa’s manufacturing sector continues to face challenging conditions, though there was a slight improvement in sentiment in March. According to the latest purchasing managers’ index (PMI) survey sponsored by Absa Bank, the seasonally-adjusted PMI rose to 48.7 points in March, up from 44.7 in February. However, it still remained below the critical 50-point mark that separates expansion from contraction, signaling that the industry is still struggling to achieve growth.

While the headline PMI suggests contraction for the fifth consecutive month, it is noteworthy that this is the highest reading since October 2024, when the index recorded 52.6 points. This improvement, though modest, indicates a slight recovery in business activity, primarily driven by better demand, especially in export sales.

The business activity sub-index saw an uptick, reflecting improved performance in certain segments of the manufacturing industry. Despite this, persistent challenges continue to weigh on the overall sentiment, particularly scheduled power cuts, which remain a significant concern for manufacturers. The electricity outages have disrupted operations, leading to decreased productivity and increased costs for businesses.

Additionally, strained diplomatic relations between South Africa and the United States are dampening the mood. The recent decision by former President Donald Trump to cut U.S. financial assistance to South Africa, citing concerns over land reform policies and the country’s stance on the genocide case against Israel at the World Court, has added uncertainty to the economic landscape. Businesses in South Africa are also worried about the potential loss of preferential trade status under the U.S. African Growth and Opportunity Act (AGOA), especially with Trump’s administration in power.

Despite these challenges, there is cautious optimism that the South African manufacturing sector could recover gradually as demand continues to improve and business sentiment strengthens. Export sales have been a key driver of this recovery, helping to cushion the impact of domestic issues like power shortages.

Looking ahead, the manufacturing sector will need to navigate both internal and external pressures to maintain momentum. Power supply issues and geopolitical tensions are likely to continue to pose risks, but if global demand remains strong and the government can address some of the structural issues, the manufacturing sector could see more stability in the coming months.

{Source Investing}

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