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Johannesburg - South African manufacturing growth slowed in December, boosting chances the Reserve Bank will continue to hold interest rates at the lowest level in more than 30 years to stimulate the economy.

Factory output expanded 2 percent, slower than the revised 3.7 percent in November, Pretoria-based Statistics South Africa said on its website today.

The median estimate in a Bloomberg survey of 13 economists was for an increase of 2.6 percent.

Output fell 2.2 percent in the month.

“Manufacturing will remain hampered by the weak external outlook, sluggish domestic income growth and demand, and further increases in input prices, especially for utilities,” Razia Khan, the London-based head of Africa research at Standard Chartered Plc, said in a note to clients before the data were released.

The Reserve Bank held the repurchase rate at 5 percent last month as a weak rand put pressure on inflation, preventing policy makers from offering more stimulus to the economy after a surprise interest rate cut in July.

Africa’s biggest economy expanded 2.5 percent last year, the slowest pace since a recession in 2009, according to the government and central bank’s estimates.

While the purchasing managers’ index rose to 49.1 in January, it remained below 50, indicating a contraction in factory output, Kagiso Tiso Holdings said on January 16.

The index has remained below 50 since September.

Inflation quickened to 5.7 percent in December, near the top of the central bank’s target of 3 percent to 6 percent.

The manufacturing industry expanded at an annualised 1.2 percent in the third quarter, limiting gross domestic product growth to the same pace, the slowest in three years.

The economy will probably expand 2.6 percent this year, the Reserve Bank said last month. - Bloomberg