While the seasonally adjusted Barclays Purchasing Managers Index (PMI) backtracks somewhat, dropping some three points in May, the headline PMI remains above the neutral 50-point mark for the third consecutive month.

The PMI fell from 54.9 index points in April to 51.9 points in May – a level deemed more indicative of conditions in the sector and in line with the eurozone.

“While some respondents indicated an improvement in export demand, local demand remained under pressure. “As new sales orders slowed, the business activity and employment indices followed suit and also declined in May,” the PMI notes.

The decline was “broadly in line” with expectations after recording an “unsustainable” level in April, says BNP Paribas economist Jeffrey Schultz.

“The pull-back in key manufacturing PMIs in May does not surprise us and paints a more accurate picture of the still relatively tentative state of the domestic manufacturing sector,” he notes.

May recorded a decline in every major subcomponent, except the suppliers performance index.

The suppliers performance index rose from 51.8 points to 56.2 points month-on-month, while the new sales orders index plunged some 6.6 index points from its five-year high of 58.4 points in April to 51.8 points in May.

The business activity index declined 3.5 points to 52.9 points in May, with indications that, despite the contraction, output could improve as the average index for the first two months of the second quarter of the year remained above that of the first quarter.

The employment index, which breached the 50-point mark in April, returned to below the neutral mark at 48 index points, along with the purchasing commitments index, which lost 3.6 points to an index score of 46.9.

The inventories index declined from 54 points in April to 51.5 index points in May.

“While we are encouraged at the four consecutive months that the PMI leading indicator – new sales orders as a ratio of inventories – has been back above its expansionary level of one, weak underlying global and domestic demand, suppressed manufacturing production, a poor labour market and depressed levels of manufacturing business confidence continue to keep us cautious,” Schultz comments.

Manufacturers faced renewed pressure on the cost front, the PMI shows, after the price index, which slipped to a four-month low in April, ticked back up to 80.1 in May, driven by the renewed weakness in the rand and oil prices.