South African PMI slips in June
· The South African
The South African manufacturing purchasing manager’s index (PMI) slipped to 47.3 in June from 50.8 in May.
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The April 2026 reading of 52.6 was the first time since September 2025 that the Bureau for Economic Research (BER) PMI rose above the neutral 50-point mark.
The second quarter average was 50.2. This was better than the first-quarter average of 48.3.
The BER said the survey took place after the US and Iran signed a memorandum of understanding to end hostilities in the Middle East and reopen the Strait of Hormuz. This led to a significant decline in the Brent crude oil price. On 26 June the Brent price was back at the level of 27 February, the day before Israel and the US attacked Iran.
June components
The BER noted that most sub-indices fell in June when compared with May. The Middle East war prompted front-loading of orders. This reversed in June as purchasing managers postponed orders in anticipation of lower prices in future.
Surprisingly, the business activity index rose to 45.6 in June from 43.5 in May and 52.8 in April. The new sales orders fell to 40.6 from 44.6 and 52.9. Some respondents warned that the recent weakness in demand could persist in the coming months.
Manufacturers stopped adding to stocks. The inventories slipped to 49.0 from 55.8 and 52.3. The higher inventories in April and May contributed positively to the headline PMI, but this likely reflected pre-emptive buying rather than expectations of stronger future demand.
The South African Reserve Bank reported that the inventory to gross domestic product (GDP) ratio fell to a record low of 4.8% in the first quarter 2026. The annual average was only 5.5% in 2025 from 5.8% in 2024, 6.1% in 2023 and is substantially below the 14.1% ratio in 2008.
The easing in Middle East resulted in a sharp drop in the purchasing price index. This fell to 71.3 in June from 84.6 in May and 85.6 in April. This followed a record monthly jump to 75.8 in March from 55.1 in February.
Prospects
The BER said the easing of tension in the Middle East also contributed to an improvement in the expected business conditions index, which tracks expectations six months ahead. The index rose to 56.6 in June from 52.9 in May and 47.4 in April.
This suggested that purchasing managers expect business conditions to be better by the year-end than they are today.
The April reading was in marked contrast to the optimism that was in the business community in February after a benign February Budget. Then the expectations index was at an optimistic 68.8.