South Africa’s factory output growth slowed to 0,4% year-on-year in August and shrank 2,1% on a monthly basis, pointing to pressure from higher interest rates and waning confidence.
Statistics South Africa said on Wednesday annualised growth eased from an upwardly revised 3,5% in July.
Analysts said the data confirmed the economy was under strain from past interest-rate hikes that were designed to tame inflation, despite a weaker currency.
”It is worrying that despite a weaker rand, manufacturing still remains under a lot of pressure and a lot of it could have something to do with business and consumer confidence weakening,” Efficient Group economist Fanie Joubert said.
”This is not nice, manufacturing is about 16% of GDP, so this is a worrying signal.”
Growth for manufacturing, the country’s second biggest sector, rebounded to 14,5% growth in the second quarter of 2008 after contracting in the first quarter on the back of a national electricity crunch.
But higher interest rates have hit consumers and businesses, evident in falling retail and new vehicle sales.
South Africa’s central bank lifted its repo rate by five percentage points to 12% between June 2006 and June 2008 before leaving it steady in August.
It will announce the next decision on Thursday, with analysts expecting the repo to remain unchanged, although coordinated rate cuts by the United States Federal Reserve and European central banks may open the way for looser monetary policy.
Economists had expected a local rate cut in 2009.
A weaker rand — the currency has lost about 25% of its value against the dollar this year — could help lift the sector by boosting exports.
Statistics South Africa said manufacturing volume growth was 0,2% lower in the three months to August compared with the previous three months, also on a seasonally adjusted basis. —