SA's Purchasing Managers' Index‚ seen as a reliable health gauge for the economy's second biggest sector‚ dropped by 5.4 points to 48.2.
It was the first time since December last year that the index‚ sponsored by Kagiso Tiso Holdings‚ had fallen below the neutral 50 level‚ which divides expansion from contraction.
"This moderation in manufacturing production has dampened the outlook for overall GDP (gross domestic product) growth in the second quarter of 2012‚" the company said.
Abdul Davids‚ research head at Kagiso Asset Management‚ said that the outcome could not be blamed entirely on weaker external demand from SA's key export markets.
He indicated a "sustained and worsening slowdown in domestic demand".
The new sales orders index‚ the largest weighted component of the PMI‚ fell by 5.2 points to 46.5 and the business activity index recorded the largest decline‚ falling by 9 index points to 47.
"This component was last at these levels in mid-2011 when factory sector output was negatively affected by industrial action‚" Davids said.
The employment index eased back below 50 to 46.8‚ but Davids‚ said it implied that employment was steady in manufacturing rather than falling.
On a more positive note‚ input cost pressures moderated significantly‚ with the price component losing 8.5 index points to reach 65.1.
"The continued decline in oil and other raw material prices seems to have outweighed the impact of the rand exchange rate‚ which continued to weaken against the US dollar‚" said Davids.
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