Johannesburg - The purchasing managers' index (PMI) has stabilised after a dip below 50 points last monthbut South African manufacturing remains weak, Kagiso Tiso Holdings said on Wednesday.
The Kagiso PMI gained 2.8 index points in July to reach 51, after falling below the 50-point level last month, the company said in a statement.
While the PMI had improved, South African manufacturing was still "under strain".
"The local manufacturing sector remains under strain due to lower demand from our key export markets," the company said.
Kagiso said most of the factors in the PMI had shown improvement, with the biggest contributor being the new sales orders index, which had increased by almost six points to 52.2.
While this was a clear improvement, it did not necessarily mean demand had risen.
"The increase in the new sales orders index was not driven by a greater number of managers reporting increased orders, but rather by the fact that orders remained unchanged," said Kagiso Asset Management research head Abdul Davids.
He said the new figures showed that demand had stabilised after a steady slide from February.
Davids said a similar result could be found in the business activity index, which gained 3.8 points to reach 50.8. A majority of managers said that activity levels had been unchanged from June to July.
Kagiso found that the price index had declined despite higher oil and commodity prices. It now stood at 62.7, the lowest level since the end of 2010.
"As a result, we expect Stats SA's producer price index, which has remained steady at 6.6% year-on-year for the last three consecutive months, to start moderating," Davids said.
The employment index had stabilised after losing six points last month.
Davids said this meant employment prospects in South African manufacturing "remain limited" and that the situation would continue until the end of the year.