SA's seasonally adjusted Investec Purchasing Managers Index (PMI) has declined from 57.9 in March to 53.6 in April, bringing the index back to its February level.

"At around 54, the level of the index is equal to the average for the fourth quarter of last year. This suggests that the surprisingly high reading for March was probably an outlier," said Andri Roux, head of fixed income at Investec Asset Management.

"These results suggest that manufacturing sector activity is still expanding at a moderate rate. Although domestic demand may have softened somewhat in the first few months of 2005, it probably still remains fairly strong. It is likely that manufacturing exports, and consequently the continued strong rand, continues to weigh on the manufacturing sector's performance," Roux said.

April's decline in the PMI was largely the result of a sharp drop in both the sub-indices for business activity and employment. The business activity index, which measures manufacturing production levels, declined sharply from 60.7 to 52.4, while the employment index disappointed by plunging to 48.4 from 57.0 in March.

"This puts the employment index below 50 once again, and suggests that jobless growth is back," Roux said.

Suppliers performance and purchasing commitments also declined noticeably in April. By contrast, the new sales orders and inventory sub-indices remained at more elevated levels. The PMI price index increased substantially from 61.5 in March to 67.4 in April.

"The upward trend in the index since January suggests that the PPI (producer price inflation) rate is likely to drift higher in the months ahead," Roux said.

Finally, the decline in the Investec PMI in April was reflected in purchasing managers’ expectations, which also eased back to February levels.

Purchasing managers’ six-month expectations deteriorated from 71.5 in March to 66.1 in April. The gross percentage of respondents expecting an improvement in general business conditions declined from 51% in March to 41% in April, while the gross percentage of respondents expecting a deterioration increased from 8% to 9%.