By Thanda Sithole
June manufacturing output encouraging but challenges remain
Manufacturing output (not seasonally adjusted) expanded by 1.9% y/y in June, after increasing by 0.7% (previously 0.5%) in May. Prior to May and June, manufacturing recorded an average monthly annual decline of 2.6% between November 2024 and April 2025, reflecting subdued domestic demand. Seasonally adjusted manufacturing production was flat (0% m/m) in June, following 2.2% growth in May. The full 2Q25 manufacturing data suggests that the sector contributed positively to GDP growth, based on 1.6% quarterly growth.
Outlook
Despite the recent positive print, year-to-date manufacturing output is down by 1.7%, reflecting broad-based weakness across several divisions. In particular, automotive production is down by 5.6% year-to-date and faces 25% United States (US) tariffs, which have resulted in vehicle exports (units) to the US declining sharply by just over 80%. Traditional Original Equipment Manufacturers (OEMs) also face fierce competition from entry-level (affordable) imports from the East, which may be contributing to the continued weakness in domestic automotive production. The broader sector also faces a 30% reciprocal tariff, which became effective last week Thursday. While the manufacturing PMI rose above the 50-neutral mark to 50.8 points in July, on account of improving domestic demand, the expected business conditions index deteriorated, suggesting that manufacturers remain concerned about the prevailing operating environment. We expect near-term manufacturing activity to remain subdued, with tariffs posing significant uncertainty for manufacturers.
Selected sector analysis
The monthly annual expansion in manufacturing output in June was driven by increases in five out of ten manufacturing divisions. Zooming into the five major divisions reveals that:
