After several Purchasing Managers Index (PMI) subcomponents lost ground in April, the seasonally adjusted Kagiso PMI declined by 2.9 index points to 47.4 for the month – its lowest level since July 2011.

Chartered Institute of Purchasing and Supply Africa MD Andre Coetzee said the result suggested renewed pressure in the local factory sector. “The level of the South African manufacturing PMI is in sharp contrast to the developed economies. In the US, the Institute for Supply Management’s manufacturing index rose to 54.9 index points from 53.7 previously, while the eurozone manufacturing PMI stood at 53.4 in April – signalling expansion for ten straight months,” he noted.

However, the Chinese preliminary manufacturing PMI rose only marginally to 48.3 index points in April.

In South Africa, the new sales orders index shed 3.1 index points to 43.5, remaining below the neutral 50-point mark for a second month running.

“It’s likely that some producers experienced lower demand for their products owing to the prolonged production stoppages in the platinum mining sector,” Coetzee asserted.

A significant development in April was the decline in the price index to 79.3 index points from 93 index points in March, which was somewhat sharper than expected.

“The slight drop in the diesel price in April, as well as the slightly stronger rand exchange rate, likely contributed to the moderation in the rate of increase in input prices,” Coetzee noted.

After nudging above the neutral 50-point mark in March, the business activity index dipped back below 50 index points, declining by 2.5 index points to 48.5 in April.

Barring the “still subdued” 51 index points reading in March, Coetzee said the index had signalled a slowdown in production since December last year.

In line with lower activity levels, the employment index dropped 7.2 index points to 44.6 – the lowest level since April last year – while the inventories index declined slightly to 52.5 index points

While the index measuring expected business conditions in six months’ time to remain largely unchanged at 54.2 index points, the PMI leading indicator, which was calculated using the ratio between new sales orders and inventories, fell further to a level below one.

“This implies that inventories were relatively high, compared with the demand for manufactured goods and, normally, this does not bode well for production in future,” Coetzee concluded.

Commenting on the data, private bank Investec stated that the PMI was “far weaker” than consensus expectations of 50.3 and signalled the weakest pace of expansion so far this year.

“Part of the decrease in activity can be ascribed to calendar effects, relating to the combination of Easter and public holidays in April, which resulted in likely additional leave days taken, relative to prior years.

“Notwithstanding, this effect, weakening domestic demand and labour strife in the allied mining sector, have weighed on the performance of the manufacturing sector,” it noted.

The fact that new sales orders were contracting, the bank added, highlighted that foreign demand had been insufficiently strong to counter the reduction in domestic demand.

“Fundamentally, weak activity in the production side of the economy, coupled with the slowing momentum in household consumption demand, will be reflected in equally soft gross domestic product readings,” it said.

BNP Paribas Cadiz Securities economist Jeffrey Schultz added that the deterioration in South Africa’s headline PMI index continued to point to an industrial sector under pressure.

“We have no doubt that the platinum-sector strikes, which have now entered their fifteenth week, are having a negative impact here, given the strong interlinkages between mining and manufacturing.

“With the most recent offer by platinum producers having recently been rejected by labour union the Association of Mineworkers and Construction Union, we expect this to remain a critical constraint to local industrial production in the months to come,” he commented.

Other, more obvious, challenges for the sector included still- elevated input-cost pressures and a weak domestic growth and demand environment.

“All of these factors leave us sceptical on a meaningful recovery in manufacturing activity anytime soon and is supported through the PMI leading indicator, which is now back at its 2009 first-quarter recessionary level,” said Schultz.

Adding to concerns raised in response to the recent PMI data, Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist Henk Langenhoven said the figures indicated that current business conditions in the metals and engineering sector and the overall manufacturing industry remained tough.