Manufacturing conditions remained strained in December, but firms are upbeat about the outlook for 2026

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) decreased further by 1.5 points to 40.5 points in December 2025, remaining firm in contractionary territory. However, it is important to note that an unusually sharp decline in the inventories index, as well as a steep decline in the employment index, were the main drivers of the weaker headline reading. New sales orders were barely changed from November and remained at a subdued level, while business activity actually improved sharply during the month, albeit remaining below the 50 mark. The headline PMI thus signals that conditions in the sector remained tough, but activity may have improved nonetheless. Furthermore, the index tracking expected business conditions in six months’ time jumped by a significant 18.1 points to 68.8 in December. This is the highest level since the 70.8 reached in September 2024.

Relative to November, the new sales orders index dipped marginally to 35.4 in December. The decline in sales was primarily driven by the domestic economy, as there were some improvements in export orders; however, these were insufficient to make a significant contribution to a turnaround in demand. The business activity index increased by 9.4 points to 46.1 in December. While remaining below the neutral level, the increase was sizeable relative to typical month-on-month movements. The index has been in contractionary territory for eleven of the twelve months in 2025, underscoring the persistence of weak underlying conditions. The employment index decreased by 6.3 points in December, falling further below the neutral 50-point mark and remaining in contractionary territory since April 2024. The weak performance in business activity and volatile sales orders continues to limit the scope for hiring, while shortages of specialised skills in certain niche industries also weigh on employment outcomes. The supplier deliveries index remained at similar levels, edging down to 45.1 points in December from 45.5 in November.

The purchasing price index declined further by 4.5 points to 50 in December, the lowest level since late 2009. While the fuel, and particularly diesel prices, increased at the start of December, the stronger rand exchange rate likely helped alleviate input cost pressure. The sharp decline in diesel prices at the start of 2026 is expected to further help contain price pressures in the new year.

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