South Africa’s manufacturing output rose by an unadjusted 6,6% in volume terms in the year to May, from a 3,8% rise in the previous month, data showed on Thursday.
Compared with April, manufacturing production in volume terms increased by a seasonally adjusted 4,5%, Statistics South Africa said.
The strong growth surprised the market, given that the rand currency was firmer in May than in April.
”Honestly, it is quite puzzling, we were expecting a weaker number because the rand was stronger in May than it was in April, so that is what is so puzzling,” said Russell Lamberti, economist at ETM.
The rand has rebounded from a three-and-a-quarter year low of R7,98 to the dollar seen in late October last year. It started the year around R6,98, and its firmest level in May was R6,9610 to the dollar.
Manufacturing is the second-biggest sector of the continent’s biggest economy after financial services, accounting for nearly 17% of gross domestic product.
Analysts said the strong growth could also be attributed to a 14,5% jump in exports in the month of May, and in this environment, the reserve bank would be comfortable raising interest rates.
”We saw a smaller [trade] deficit [in May], so manufacturing exporters did a lot better that month, and that is what is coming through in these numbers,” he said.
”A figure like this reverses the downward trend we have seen in the past few months and reflects a resilience in the sector. It could possibly justify why the reserve bank would feel comfortable raising rates going forward,” Lamberti said.
The South African Reserve Bank has hiked its key repo rate by 2,5 percentage points to 9,5% since last year June, although it paused its tightening phase in February and April.
Stats SA said manufacturing volumes declined 0,2% in the three months to the end of May compared to the previous three months, on a seasonally adjusted basis.
For full release go to www.statsa.gov.za – Reuters