South Africa's manufacturing output falls 3.5% as input costs persist

South Africa's manufacturing sector experienced a 3.5% year-on-year decline in production in September, primarily due to high input costs linked to fuel prices and subdued demand. This contraction was led by significant declines in the motor vehicles, parts and accessories and other transport equipment sector, which slumped 15%, and the wood and wood products, paper, publishing and printing division, which tumbled 11.2%.

Despite the decline in September, the manufacturing sector managed to edge up 0.9% in the third quarter of 2026 compared to the second quarter, with five of its 10 divisions reporting positive growth rates. According to Stats SA data, factory output was flat in September compared to August, following a month-on-month drop of 3% in August and an increase of 2.1% in July.

The September figures highlight the continued weakness in manufacturing activity, with a cumulative decline of nearly 2% over January-September. Thanda Sithole, senior economist at FNB & WesBank, noted that the sector faces persistent cyclical and structural constraints. Sithole added that the near-term outlook for manufacturing remains challenging due to elevated production costs, exacerbated by geopolitical tensions in the Middle East and their implications for domestic fuel prices.

The manufacturing sector has been struggling for years, and its contribution to national output was recently lowered to 11.9% from 12.4% following Stats SA's rebasing of South Africa's GDP. This reduction also saw the sector drop to fourth among the biggest industry contributors to GDP from third place. In 1995, the sector accounted for 21.5% of GDP, highlighting its significant decline over the years.

A recent Absa purchasing managers index (PMI) showed that conditions for the sector improved slightly in October, with production and new sales orders increasing from August's lows. However, underlying demand remained subdued, with respondents citing challenging domestic trading conditions and logistical disruptions, particularly at the Durban harbour.

Investec economist Lara Hodes noted that the sector is in distress, with insufficient demand being a key limitation, alongside persistent infrastructure and logistics challenges and policy uncertainty. Hodes also highlighted that elevated input-cost pressures associated with the ongoing conflict in the Middle East continue to weigh on operating conditions and squeeze profit margins.

Some relief to manufacturers is expected from the government's temporary fuel-levy reductions in November and December. The wholesale cost of diesel fell by R1.20 a litre, thanks to a temporary general fuel levy cut announced in last month's medium-term budget policy statement, providing some respite to households and businesses.

Key points

• Manufacturing production declined 3.5% year-on-year in September due to high input costs and subdued demand.
• The sector's contribution to national output was recently lowered to 11.9% from 12.4% following Stats SA's rebasing of South Africa's GDP.
• The government has announced temporary fuel-levy reductions in November and December to provide relief to manufacturers.