Bloomberg News

South Africa Manufacturing Growth Climbs on Low Rates

April 11, 2012

South African manufacturing growth accelerated more than expected in February as wage settlements in excess of inflation spurred consumer spending and strengthened growth in Africa’s largest economy.

Factory output rose 4.1 percent from a year earlier, faster than the revised 2.3 percent expansion in January, Pretoria- based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of five economists was 2.7 percent. Output rose a seasonally adjusted 2.8 percent in the month.

“There has been a clear improvement in activity levels during the past few months,” Kevin Lings, an economist at Stanlib Asset Management in Johannesburg, said in e-mailed comments. “Hopefully, this improvement is supported by an ongoing expansion of South African business activity into southern Africa, increased infrastructural investment activity and a steady improvement in world economic conditions.”

The central bank has kept its benchmark interest rate at 5.5 percent since November 2010, the lowest level in more than 30 years, to help bolster the economy’s recovery. Wage settlements negotiated on an industry wide basis averaged 7.7 percent last year, compared with an average inflation rate of 5 percent, according to Andrew Levy Employment Publications.

“The domestic economic outlook appears slightly more favorable against the backdrop of a more positive global outlook,” Gill Marcus, the governor of the central bank, said on March 29. “The recovery in the manufacturing sector is expected to continue.”

South Africa’s Purchasing Managers Index (SAPMI) has remained above 50 for the past three months, indicating an expansion in factory output, according to Kagiso Tiso Holdings. The index reached a two-year high of 57.9 in February, before declining to 55.1 last month.

“Trading conditions are likely to remain relatively tough for much of 2012,” Nedbank Group Ltd. (NED), the country’s fourth- largest bank, said in e-mailed comments. “Weak demand in Europe and slower growth in key emerging markets will hurt export sales, containing growth in output and earnings.”

The rand depreciated 18 percent against the dollar in 2011, the most of 16 major currencies tracked by Bloomberg. Since then, the currency has gained 1.3 percent.

The rand traded 0.1 percent stronger at 7.9851 a dollar at 3:25 p.m. in Johannesburg, reversing a 0.8 percent decline in earlier trading.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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