The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose above the neutral 50-point mark for the first time since September 2025, increasing to 52.6 in April, from 49 in March.

The improvement was driven by a rebound in both business activity and new sales orders, pointing to a stronger start to the second quarter following a weak first quarter.

However, the index indicates that some of this improvement likely reflects front-loading of demand ahead of expected price increases, raising questions about the sustainability of the recovery.

The business activity index increased for a second consecutive month, returning to expansionary territory.

Absa says this suggests that production picked up meaningfully at the start of the second quarter as new sales orders also rose sharply in April, following a subdued first quarter.

The increase appears to have been driven primarily by stronger domestic demand, while export sales declined.

The PMI says this divergence suggests that the recovery is not broad-based and remains vulnerable to external headwinds.

Moreover, Absa says some respondents indicated that orders may have been brought forward in anticipation of further cost increases, potentially resulting in weaker demand in the months ahead.

The inventories index increased and moved above the neutral 50-point mark for the first time since August 2025.

Absa says this likely reflects stock-building behaviour, with firms buying inputs ahead of expected price increases.

While this supported the headline PMI in April, it may also point to temporary factors rather than a sustained increase in underlying demand.

Additionally, the PMI notes that cost pressures intensified further in April, with the purchasing price index rising to 85.6 following the record increase in March.

The index is now more than 30 points above its level at the start of the year.

Absa says this sharp rise reflects higher oil-linked input costs and a slightly weaker exchange rate, adding that elevated input costs are likely to squeeze profit margins and could limit the sustainability of the recent improvement in activity.

In addition, Absa says continued cost pressures at the factory level may contribute to broader inflationary pressures in the economy.

The index tracking expected business conditions improved slightly in April, although it remains below the neutral 50-point mark.

This suggests that while purchasing managers are somewhat less pessimistic than in March, confidence in the outlook remains subdued.

Absa explains that most responses were in before the fuel levy relief extension was announced, which does soften the direct hit from the diesel price increase a little.

Meanwhile, the index notes that the business activity index increased for a second consecutive month, returning to expansionary territory in April.

This suggests that production recovered at the start of the second quarter after a weak first quarter.

While the improvement points to stronger near-term demand, Absa says it remains to be seen whether this marks the start of a sustained recovery or reflects temporary factors such as the front-loading of orders.

Additionally, the new sales orders index rose sharply in April, following a subdued first quarter. The increase was driven primarily by stronger domestic demand, while export sales declined.

Absa explains that this divergence suggests that the recovery remains uneven and dependent on local conditions.

In addition, some respondents noted that orders were likely brought forward ahead of expected price increases, which could lead to weaker demand in the coming months.

Further, the employment index remained broadly unchanged in April and continues to hover in contractionary territory.

Despite the improvement in activity and orders, Absa says firms appear reluctant to expand their workforces, suggesting ongoing caution about the sustainability of the recovery and the broader demand outlook.

The inventories index increased and moved above the neutral 50-point mark for the first time since August 2025.

Absa notes that this likely reflects stock-building behaviour, as firms typically buy inputs ahead of anticipated price increases.

While higher inventories contributed positively to the headline PMI, the index indicates that this may partly reflect precautionary buying rather than a sustained improvement in underlying demand.

Meanwhile, the supplier deliveries index edged lower following a sharp increase in March but remained elevated.

As this index is inverted, higher readings indicate slower deliveries.

Given ongoing disruptions to global shipping routes and persistent logistical challenges at South African ports, Absa says the current level likely reflects supply-side constraints rather than stronger demand for inputs.

“As such, the signal from this index should be interpreted with caution,” it says.

Further, the purchasing price index rose further in April to 85.6, following the record increase recorded in March.

Absa notes that the index is now significantly higher than at the start of the year, reflecting the impact of elevated oil-linked input costs and a weaker exchange rate.

The index explains that these rising cost pressures are likely to weigh on manufacturers’ profit margins and may limit the sustainability of the recent improvement in activity.

In addition, persistent input-cost inflation could contribute to broader price pressures in the economy.

“The fuel levy relief extension does soften the blow,” Absa notes.