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Johannesburg - The seasonally adjusted Kagiso Purchasing Managers' Index (PMI) remained unchanged at 50.4 in May, Kagiso Tiso Holdings said on Monday.
This indicated the manufacturing sector was struggling to gain any real momentum, head of research at Kagiso Asset Management Abdul Davids, said.
The PMI measures business conditions in the manufacturing sector. Below 50 indicates contraction and above 50 shows expansion.
The Chartered Institute for Purchasing and Supply Africa and the Bureau for Economic Research at the University of Stellenbosch conduct the survey every month.
Davids said although the headline number was flat, the index's two largest-weighted sub-components lost ground over the period as conditions in the manufacturing sector remained tough.
After gaining 1.7 points in April, the new sales orders index fell 2.6 points to 51.1.
"This is largely due to depressed foreign demand, which appears to be outweighing the potential positive impact of the weaker rand," Davids said.
He said locally this decline in demand was in line with the current slowing trend in consumer spending.
The business activity index, which rebounded in April, declined by 1.6 points to 50.6.
The overall PMI was supported by solid increases in the inventory and employment sub-components.
The inventory index rose by nearly eight points to 54.7, recovering most of the ground it lost in April.
However, Davids was doubtful about the sustainability of this increase as demand for manufactured goods remained weak.
Despite a 5.1 point rise, the employment index stood at 47.2, below the key 50-point mark.
Davids said the outcome of the current round of wage negotiations in a number of manufacturing sub-sectors would be an important factor in determining the outlook for employment growth in the second half of 2013.
Following a brief respite in April, the price index gained 4.4 points to 82.4, signifying persistent cost pressures.
Davids said the sustained rand weakness might have contributed to the increase.
Various data sources seemed to suggest the recent moderation in the Producer Price Index could reverse in the next few months, he said.
