Kagiso Tiso's Purchasing Manager's Index shows a slight improvement to marginally positive territory, but the sub-component for expected business conditions declined to its lowest level in 10 months.

This part of the index gives an indication of what purchasing managers on the factory floor think of the six months going forward.

Shireen Darmalingam, an economist at Standard Bank, said: ''This component posted yet another softer print in July, signalling that businesses are increasingly more pessimistic about future business conditions.''

It fell to 54.0 points in July from 57.4 in June.

New sales orders improved, helping to carry the PMI as a whole to 51 points - generally considered a sign of an expanding manufacturing sector.

''The improvement in July does not necessarily suggest better demand conditions,'' said Kagiso Tiso Holdings.

''It rather indicates that demand may have stabilised in July following the drop-off during June. In light of the soft data that continues to emerge from Europe, any short-term external demand improvement seems unlikely."

Other data have also revealed a clearer picture of a sector in pain.

About 44000 manufacturing jobs were lost between April and June, according to the Quarterly Labour Force Survey released by Statistics SA this week.

Negative growth in the UK and flat to negative growth in Europe has dampened the demand for South Africa's manufactured goods.

The country's latest trade statistics seem to confirm this.

The trade deficit narrowed to R5.7-billion in June from R8.9-billion in May, but this was still much higher than the market's expectation of a R4-billion deficit.

''The decline in exports is symptomatic of troubles being experienced in the eurozone. Exports to Europe declined by 7.3% month-on- month in June,'' said economists.