After moving above the key 50-point mark in February, the seasonally adjusted Kagiso Purchasing Managers’ Index (PMI) fell by 4.3 points in March to 49.3, investment group Kagiso Tiso Holdings said on Tuesday.

This pullback was largely driven by significant declines in the new sales orders index of 8.2 points, as well as in business activity indices, which lost 4.5 points.

Kagiso Asset Management research head Abdul Davids said the decline in the new sales orders index suggested that an environment of rising demand was less widely dispersed throughout the sector than in February, when the index recorded a 9.3-point gain.

“In light of slowing domestic consumer spending and the prolonged recession in Europe, the current level of new sales orders is probably more realistic,” he commented.

Production also underperformed in March, with the business activity index falling to 47.7.

Despite this, the average level for the first quarter moved up to 49.8 from 45.5 in the fourth quarter of 2012.

However, the deterioration in both demand and production was negative for employment, as evidenced by the 3.1-point decline in the employment index.

According to Davids, this suggested that the manufacturing sector may have shed jobs in the first quarter of 2013.

Meanwhile, the upward trend in input costs seen over the last few months continued in March, with the price index rising by 1.3 points to 87.3.

“The rand averaged R9.11 to the dollar in March compared to R8.85 in February, with this sustained weakening placing significant upward pressure on input costs that are predominantly dollar-based,” Davids explained.

In addition, the expected business conditions index fell by nearly ten points to 47, indicating purchasing managers’ waning optimism around future business conditions.

“Renewed concerns around the outlook for the European economy – our largest export market – particularly in the wake of the Cyprus bailout may have fuelled the more downbeat business expectations. This is further borne out by the PMI leading indicator – the ratio of new sales orders to inventories – which slipped back below one,” he said.