PMI falls as factory output slows

THE purchasing managers' index fell for the third consecutive month in May, suggesting the pace of recovery in the key manufacturing sector after last year's downturn is losing some steam.

THE purchasing managers' index fell for the third consecutive month in May, suggesting the pace of recovery in the key manufacturing sector after last year's downturn is losing some steam.

Analysts said the PMI data, coming a day after credit extension data surprised on the weak side, leaves the door open for another interest rate cut to support the economy despite earlier indications from Reserve Bank governor Gill Marcus that rates should stay on hold for some time.

A survey conducted by the Bureau for Economic Research and sponsored by Kagiso Securities showed the PMI was down at 51,1 in May, on a seasonally-adjusted basis, from 55,2 the previous month.

"While the level of the index continues to indicate that the factory sector is expanding, the latest reading is the lowest since November and suggests that the pace of manufacturing production has eased in recent months," Kagiso said.

The survey showed that the business activity component of the index fell 5,3 points to 49,0 in May, a decline Kagiso said might have been exaggerated by a three-week Transnet strike. - Reuters

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