The seasonally adjusted Investec Purchasing Managers Index fell below 50 in January 2006, as the strong rand eroded confidence in the manufacturing sector. It was the first reading below 50 since October 2003.

The January PMI dropped to 48.1 from 52.5 in December after dropping unexpectedly to 50.0 in November from 54.1 in October.

The break-even level for the index is 50, so a reading above 50 implies expanding trade activity.

"The decline to a level below 50 indicates a contraction in manufacturing sector activity. The number appears to be at odds with strong overall domestic demand, but can probably be explained by the strength of the rand against the major currencies in recent months," said Vivienne Taberer, portfolio manager at Investec Asset Management.

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SA's official statistics body produces a number of key indicators, including monthly inflation and quarterly GDP figures, unemployment and population counts.

ECONOMY UPDATE Business expectations remain positive Manufacturing output up 6.2% Retail sales increase Pension fund assets exceed R1-trillion Business confidence at record high Net reserves climb to $18.7bn Govt to spend R372bn on infrastructure Jan house price growth at 14.9% Interest rates unchanged Strong new vehicle sales Manufacturing hit by strong rand SA hotels boost occupancy levels Economic growth creating jobs Producer inflation rises Inflation dampens rate cut hopes