South African year-on-year factory output fell for a 10th consecutive month in July, sliding 13,7%, data showed on Thursday, but production was up on the previous month, pointing to signs of a recovery.
Statistics South Africa said the decline in manufacturing output slowed from a 17,2% fall in June, and expanded by 3,3% on a month-on-month basis.
This was the third month-on-month improvement, suggesting conditions may be improving in one of the sectors hardest hit by a global recession, which could lessen the need for another interest rate cut in two weeks.
”It looks as though the pace of the contraction is slowing. I think that’s a good sign,” said Colen Garrow, economist at financial services group Brait.
”I think there is a glimmer of hope that the pace of the contraction will slow further in the months ahead and that we will soon be joining the improvement in manufacturing activity that we’ve seen globally.”
Manufacturing — a key employer than makes up about 14% of the gross domestic product — has been the biggest drag on the economy this year, pulling it into its first recession in 17 years.
Official figures show factory output fell by an annualised 10,9% in the second quarter of 2009, after a 22,1% contraction in the first quarter — the biggest decline on record.
The purchasing managers index, which measures underlying manufacturing activity, climbed in August — suggesting another improvement in the next month’s factory data — although at 39,3 the index still signals contraction.
Analysts said the manufacturing data was unlikely to have a major influence on the central bank’s next interest rate decision, after it cut the repo rate by 50 basis points to 7,0% a month ago, but it may ease the need for intervention to boost the economy, while inflation remains a concern.
The latest rate move took total cuts since December to five percentage points.
Inflation data due on September 22, the day of the rates decision, was expected to have more of a bearing on the next move.
Government bonds were steady after the release of the data, with the 2015 yield up one basis points to 8,085% at 11.40GMT, compared with before the numbers were released.
Statistics SA also said output was down 0,3% in the three months to July compared with the previous three months, also on a seasonally adjusted basis. — Reuters