South Africa’s seasonally adjusted Kagiso Purchasing Managers Index (PMI) stabilised during May with 53.6 points recorded, compared with 53.7 points in the prior month, Kagiso Asset Management said on Friday.

However, key underlying developments recorded in several main PMI subcomponents during the month indicated a potential manufacturing sector slowdown in the next few months, said Kagiso Asset Management head of research Abdul Davids.

He commented that despite a 4.2-point rise in the employment index to 53 points, marking the first rise above 50 points since February 2011 and indicating employment expansion in the manufacturing industry, he warned that this might not be sustainable.

Other significant PMI subcomponents indicated a slowdown in manufacturing sector growth.

The new sales orders index dropped for the third consecutive month, by 3.7 index points, to 51.7 in May, reflecting a rapid deterioration in demand for locally produced goods. The business activity index also experienced a fall, reaching 56 index points, after averaging 58 during the first quarter of 2012.

The price index increased 2.5 index points to 73.6, while the expected business conditions index rose 2.8 points. However, the PMI leading indicator, which calculated new sales orders as a ratio of inventories, fell to its lowest level since early 2009 at 0.84 index points.

“This means that inventories are too high relative to the demand for manufactured goods and suggests a possible further easing in headline PMI in the coming months,” Davids said.