South Africa’s manufacturing output expanded at a slower rate in the year to July but growth remained robust, suggesting rising interest rates may not stifle growth in Africa’s biggest economy. Production rose by an unadjusted 5,8% in volume terms in the year to July, slowing from an upwardly revised increase of 6,3% in June, data from Statistics South Africa showed on Tuesday.
Analysts said the sector had benefitted from a depreciation in the rand since May, but warned it may still be affected by a slowdown in the global economy and lower domestic spending as higher interest rates take effect.
Compared with June manufacturing production in volume terms fell by a seasonally adjusted 0,7%.
”We are not quite out of the woods on the manufacturing side, there are still some risks,” Brait economist Colen Garrow said.
Manufacturing is the second-biggest sector of the economy after financial services, accounting for nearly 17% of gross domestic product.
The rand has depreciated about 15% against the dollar so far this year, sparked by a global rout in emerging markets in May and concerns over the country’s widening current account deficit.
In the three months to the end of July, manufacturing volumes rose by 2,9% compared to the previous quarter, also on a seasonally adjusted basis.
The South African Reserve Bank hiked its repo rate by half a percentage point in June and again by the same amount to 8% in August. Most analysts expect another full percentage point increase in interest rates before the end of the year. – Reuters