South Africa’s manufacturing output shrunk by 11,7% year-on-year in March, an improvement on the previous month, but signalling an economy in recession.
The data, following a record 15,1% contraction in February, may add weight to arguments for recent aggressive interest rate cuts to continue, to boost growth.
Statistics South Africa said the sector, the economy’s second biggest, contracted by 6,8% in the first quarter compared to the previous three months.
On a monthly basis output grew by 0,1%.
Manufacturing, along with mining, has been particularly hard hit by a global slowdown that has knocked demand for products, already under pressure from dwindling consumer spending due to relatively high interest rates.
The sector suffered its biggest decline in nearly 50 years in the fourth quarter of 2008, which helped drag overall economic growth down 1,8% — the first contraction in a decade.
Poor output and retail sales data so far this year point to another fall, and the first recession in Africa’s biggest economy in 17 years. Economic growth data for the first quarter will be released on May 26.
”It’s a bit weaker than I would have expected, but I think it’s not surprising in that we’re very much in the depths of this manufacturing recession,” Russell Lamberti, economist at market analysts ETM, said.
”So, it’s a more disappointing figure than I would have expected, but I think in the context I don’t think it’s going to have a major impact on markets, I think we already know that there’s a lot of bad news priced in for this sector.”
South Africa’s central bank has cut its repo rate by 350 basis points to 8,5% since December, and analysts see more reductions this year to try kick-start growth.
It is not yet unwound the 5 percentage points in hikes between June 2006 and June 2008 aimed at taming inflation.
The rand was slightly firmer at 8,43 against the dollar at 11.30am GMT, while the yield on the 2015 bond was steady at 8,195%.
Statistics South Africa rebased its survey to 2005 from 2000 in February and added new weightings that lifted the year-on-year figure, particularly due to an increase in the weights for iron and steel and motor vehicle parts and accessories. — Reuters