SA manufacturing up 4%

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Johannesburg - South Africa's manufacturing output grew 3.9 percent year-on-year in volume terms in January, above forecasts, compared with a 2 percent increase in December, Statistics South Africa said on Thursday.

On a month-on-month basis production rose by a seasonally adjusted 2 percent and grew 1.8 percent in the three months to January compared with the preceding period.

Economists had forecast 2.4 percent growth year-on-year in factory output.

ANALYST COMMENT

ANISHA ARORA, EMERGING MARKET ANALYST, 4CAST

“Manufacturing has been surprisingly resilient given the labour unrest in Q4, while pockets of strike action have spread in Q1 2013.

“However the mines have been those majorly affected, and even here the January print rebounded to 7.3 percent year-on-year after 4 months in the black, suggesting the direct effects of the strike action are starting to disappear.

“Looking ahead, with the February Kagiso PMI recovering back above 50 to the highest since March 2012 at 53.6, this suggests the outlook for manufacturing is improving. But there are still signs of weakness in the key sectors where the strike action would have seen a bigger impact, namely basic iron and steel.

“Thus with persistent economic activity and consumption worries, we don't look for leaps and bounds in the headline rate.”

MARKET REACTION

The rand was at 9.2360 against the dollar at 13:23 SA time from 9.2450 just before the release of the data.

The yield on the benchmark 2026 government bond fell to 7.44 percent from 7.455 percent.

BACKGROUND

- The manufacturing sector contributes about 15 percent of gross domestic product and is key for creating employment in an economy with an official jobless rate of a quarter of the labour force.

- South Africa plans to spend 5.8 billion rand over the next three years to help manufacturers affected by the global economic downturn upgrade their factories, improve products and train workers.

- Recent high-frequency data has pointed to an economy struggling to grew, suggesting interest rates will stay at four-decade low for longer to ease pressure on debt-ridden households. - Reuters