Andre Coetzee, Head of Fixed Income at Kagiso Securities said the recent Transnet strike was among the factors that contributed to a decline in the May PMI.
"The latest (May) business activity decline has been exaggerated by the Transnet labour action.
"For that reason, and notwithstanding the risks that (for example) drawn-out European sovereign debt problems pose to the SA manufacturing sector, one should be cautious not to get carried away by the fairly negative tone of the May PMI data," he said.
The PMI's leading indicator, new sales orders minus inventories, moved from 5.6 in April to 3.4 during May.
The survey showed that while the level of the index continued to indicate an expansion in the factory sector, it did show that the latest reading was the lowest since November 2009 and suggested that the pace of manufacturing production had eased in recent months.
The PMI expected business conditions index experienced another mild decline to 64.1 in May, with its long-term average at 67.6 points.
The PMI has so far averaged 53.2 in the second quarter of 2010 versus 56.5 in the first quarter.
The average PMI decline between 2010Q1 and 2010Q2 to date has been driven by the business activity index, which contributed 2.2 points (almost 65%) to the fall.
"This does not bode well for actual factory production as measured by Stats SA," said Coetzee.
In terms of a quarterly average, the PMI reached a trough of 37.2 in the second quarter of last year.
Commenting on this Coetzee said: "Globally there has been a lot of emphasis on the impact of inventories in helping to drive countries such as the US out of recession."
But the survey pointed out that in the case of the SA PMI, the inventory index contributed 2.4 points to the trough to peak rise in the PMI.
The employment index added 2.9 points but the PMI rebound was driven by new sales orders (7 points) and the business activity index (6.3 points).
"In terms of the SA PMI, the recovery was much more than just an inventory story, the quality of the rebound was high," said Coetzee.
The PMI price index gained 4 points to reach 67.8 in May, the highest level since December 2008 and indicating that the higher than expected PPI reading of 5.5% y/y in April 2010 may not have been a once-off occurrence.
The employment index slipped by almost 9 index points in May and fell back to below the crucial 50-index point mark.
"As in the case of business activity, we would want to see another month or two of data before making a definitive call on factory job prospects," concluded Coetzee.
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