South Africa's manufacturing output beat market expectations by growing 2.5 percent year-on-year in volume terms in October from a revised 1.7 percent fall in September, Statistics South Africa said on Tuesday.

Economists had forecast a 1.2 percent year-on-year fall in output.

On a month-on-month basis production rose by a seasonally adjusted 1.2 percent and by 0.3 percent in the three months to October compared with the previous quarter.

 

ANALYST COMMENT

ANISHA ARORA, EMERGING MARKET ANALYST, 4CAST

“This is quite a surprising figure given that we had forecast output at -4.5 percent year-on-year.

“The industrial strike action which escalated through September and well into October not only affected mining output but also manufacturing and industry, closing plants and operations for weeks and resulting in vast losses of production volumes.

“What's interesting is that the Kagiso PMI fell to the lowest levels since July 2011 in October and has since remained below 50, leading us to expect a pullback and negative figure in the November manufacturing print.”

 

ISAAC MATSHEGO, CHIEF ECONOMIST, NEDBANK

“The overall trend remains weak. Manufacturing conditions are quite unfavourable at the moment both locally and internationally.

“The PMI numbers are very weak; in South Africa the Kagiso PMI number is still in negative territory, which tells us that manufacturing is not likely to rebound strongly in the coming months.

“And now heading to the holiday season, a lot of factories will be closing so there will be that seasonal fall in production.”

 

MARKET REACTION

The rand was steady at 8.6830 to the dollar at 13:16 SA time.

The yield on the three-year bond was also unchanged at 5.455 percent and the 2026 issue at 7.335 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 over a quarter of the labour force.

- Data released by Statistics South Africa earlier in the session showed manufacturing added no jobs in the third quarter compared with the previous quarter as the sector struggles subdued demand.

- Manufacturing output increased by 2.6 percent in 2011, only half of the expansion seen in 2010.

- 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. - Reuters