South Africa’s manufacturing output growth slowed sharply in May, official data showed on Thursday, suggesting the sector remains under stress from higher interest rates.
Statistics South Africa said manufacturing expansion fell to an unadjusted 0,7% in volume terms year-on-year from an upwardly revised 10,2% in April.
”It is lower than expected and I think in general it confirms that the production sector remains under some stress,” said Efficient Group economist Fanie Joubert.
”There is a lot of noise that rates could be left unchanged in August but we still expect a hike because of [strong] inflation. But this lower-than-expected manufacturing data could add weight to the ‘unchanged’ argument,” he added.
Manufacturing accounts for about 17% of the country’s gross domestic product, and ranks as the second-biggest sector after financial services.
The South African Reserve Bank has raised rates by a cumulative five percentage points since June 2006 as it grapples with spiralling inflation.
The key CPIX consumer inflation gauge has been above a 3% to 6% percent target band since April 2007, and accelerated to 10,9% year-on-year in May 2008.
Statistics South Africa said that compared with April, manufacturing production in volume terms contracted by a seasonally adjusted 3,8% in May.
In the three months to the end of May, manufacturing volume growth was 2% compared with the previous three months, also on a seasonally adjusted basis. — Reuters