Manufacturing production fell more than expected in May 2026

Manufacturing indicators continued to decline in May 2026, showing a drop of 4.3% compared to the same period last year. This result was worse than economists' forecasts.

Main factors of the downturn

According to Statistics SA data, the following sectors contributed the most negatively: food and beverages (a decrease of 6.4%, which accounted for -1.6 percentage points); basic iron and steel, non-ferrous metal products, metal articles, and machinery (a decrease of 5.6%, or -1.3 percentage points); and wood, wood products, paper, publishing, and printing (a decrease of 11.0%, or -1.0 percentage point).

However, when looking at seasonally adjusted data, production in May 2026 increased by 1.1% compared to April 2026. Nevertheless, over the three months ending in May 2026, seasonally adjusted production decreased by 1.0% relative to the previous quarter.

Expert assessment of the situation

Professor Simphiwe Madikizela, an economist from the University of South Africa (Unisa), expressed concern about the state of the sector. He noted that in previous quarters, the industry faced problems related to structural limitations in logistics, port infrastructure, and the railway network, as well as rising electricity prices and other operating costs.

Madikizela added that some manufacturers switched to the Maputo corridor and port due to congestion at the Port of Durban, and also mentioned issues at other ports such as Cape Town. Furthermore, he emphasized that the war in the Middle East, which began in late February 2026, exacerbated the situation in the manufacturing sector.

According to him, the situation worsened after the ceasefire ended and the peace agreement was violated, leading to an increase in attacks and ship strikes. The price of crude oil sharply rose from $70 to $78 per barrel. Meanwhile, the US president warned of increased attacks, although hope remains for the resumption of peace talks.

Market analysis and forecasts

Professor Raymond Parsons from the Northwestern University School of Business stated that the 4.3% year-on-year decline, which was worse than expected, confirms serious pressure on the manufacturing industry. Although the monthly growth of 1.1% is a positive point, it does not compensate for the losses of the previous three months. Parsons believes that both cyclical and structural factors are keeping current production trends in negative territory, which is aggravated by the growth of excess capacity in the sector.

He also noted that the impact of the global energy crisis is still felt in the economy. The structural problem lies in inefficient economic infrastructure, which weakens the price competitiveness of many South African goods. Parsons added that stabilizing the situation in the Middle East could contribute to the recovery of production in several key areas.

Investec economist Lara Hodges reported that the production contraction prolonged the weak start to the second quarter after a 2.9% year-on-year fall in April. She noted that the data received was weaker than Bloomberg consensus forecasts, indicating that the sector continues to struggle to gain significant momentum amid weak demand, increased price pressure due to the oil price shock, and persistent global uncertainty.

According to Hodges, seven out of ten categories included in the production basket declined year-on-year. The food and beverages segment contributed the most negatively, accounting for 22.2% of the total volume, which fell by 6.4% year-on-year, leading to a -1.6% drag on the main indicator. This corresponds to the decline of the Absa Business Activity Index by 1.8 points in May, signaling a return of business activity into contraction territory, and new orders also fell below the 50 mark due to weakening demand.

Hodges also pointed out that manufacturers faced a sharp rise in raw material costs due to the war in the Middle East. Higher oil prices, rising fuel costs, and supply chain issues led to an overall increase in price pressure. Furthermore, the sector is constrained by logistical inefficiencies, which affects export potential, and high administrative costs.

Senior economist Thanda Sithole from FNB and Wesbank stated that production activity remains constrained, with output volume decreasing by 1.7% in the first five months of 2026, exceeding the total reduction for 2025 at 1.3%. It is expected that the sector will remain under pressure in the near future due to high production costs caused by the initial impact of the conflict in the Middle East, as well as constant internal infrastructure constraints.

iol.co.zaJune 30, 14:36

Employment in South Africa declined by 0.8% in the first quarter of 2026, according to Stats SA

Statistics South Africa (Stats SA) released its Quarterly Employment Statistics for March 2026 on Tuesday, revealing a decrease in overall employment. The total number of employed individuals fell by 80,000, representing a quarter-on-quarter reduction of 0.8%, moving from 10,548,000 in December 2025 to 10,468,000 in March 2026.

Sectoral Employment Dynamics

Stats SA specified that reductions were observed in the public services sector (a decrease of 53,000 people), trade (a drop of 40,000 people), transport (a fall of 3,000 people), and electricity generation (a reduction of 1,000 people). Meanwhile, some industries showed growth: manufacturing increased by 7,000 people, business services by 7,000 people, mining by 2,000 people, and construction by 1,000 people. Overall, the total decline in employment amounted to 121,000 people, corresponding to a year-on-year decrease of 1.1% between March 2025 and March 2026.

Changes in Full and Part-Time Employment

According to Stats SA, full-time employment decreased by 24,000 people, or 0.3% compared to the previous quarter, falling from 9,433,000 in December 2025 to 9,409,000 in March 2026. This decline was caused by reductions in the trade sector (-27,000), public services (-3,000), transport (-2,000), construction (-1,000), and manufacturing (-1,000), while the electricity generation sector remained unchanged. However, growth was noted in business services (an increase of 8,000 people, or 0.4%) and mining (an increase of 2,000 people, or 0.4%).

Part-time employment contracted by 56,000 people, which is a 5.0% drop quarter-on-quarter, decreasing from 1,115,000 in December 2025 to 1,059,000 in March 2026. The main reasons for this decline were cuts in public services (-50,000), trade (-13,000), business services (-1,000), transport (-1,000), and electricity generation (-1,000). Nevertheless, manufacturing showed an increase of 8,000 people (or 10.5%), and construction saw an increase of 2,000 people (or 3.4%).

Income and Labor Market Expert Assessment

The total income paid to employees decreased by 43.4 billion rand, equivalent to a 4.0% reduction compared to 1.08 trillion rand in December 2025, reaching 1.04 trillion rand in March 2026. This fall is linked to contractions in manufacturing, public services, trade, construction, electricity generation, and transport, although business services and mining recorded growth. Dr. Lerato Ntuli, an economist at Anchor Capital, noted that the latest QES data indicates a moderate deterioration in local labor market conditions in the first quarter of 2026, as overall employment fell to 10.468 million people (compared to 10.548 million in the fourth quarter of 2025), reflecting a 0.8% contraction.

Ntuli added that these losses were only partially offset by modest growth in more cyclical and externally supported sectors, such as manufacturing (+0.6% QoQ), business services (+0.3% QoQ), mining (+0.4%), and construction (+0.2% QoQ). It is projected that employment conditions in the second quarter of 2026 may be further weakened by the consequences of the Middle East conflict, which has pressured global demand and increased uncertainty. She concluded that the combination of this factor with already subdued domestic activity limits opportunities for significant job creation, reinforcing the perception of labor market fragility.