South Africa’s manufacturing output slowed year-on-year in May, adding to recent data that suggests the pace of economic recovery after last year’s recession is losing some steam.
Thursday’s manufacturing number leaves open the possibility of another rate cut when the central bank holds its policy meeting later this month, although some analysts still expect rates to stay on hold.
Statistics South Africa said factory production rose by 7,9% year-on-year in volume terms in May, slowing from a downwardly revised 8,6% in April and below Reuters poll forecasts of 8,4%.
Compared with April, factory production in volume terms rose by a seasonally-adjusted 0,3% and was up 1% in the three months to May from the previous three months.
Manufacturing output, a key contributor to South Africa’s GDP, rose for the first time in more than a year on an annual basis in December and had been expected to steadily recover in coming months.
But the recovery now appears to be stuttering, with the purchasing managers index, a key measure of factory activity, falling to 48,4 in June, below the 50 mark which separates growth from contraction in manufacturing activity.
“Manufacturing picked up strongly after the recession but it’s now losing steam, a trend we have also seen globally,” said Citadel economist Salomi Odendaal.
“The strong rand is also holding back the competitiveness of the sector. We expect the sector to improve during the rest of the year but the pace of that will be slow.
Both the government and the central bank have previously expressed concern over the relative strength of the rand which was last at 7,5840 against the dollar from 7,5755 before the data was released at 11am GMT.
The yield on the 2015 bond edged up slightly to 7,775% from 7,77% beforehand. – Reuters