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johannesburg - Manufacturing data released by Statistics SA on Thursday showed the country's economy was beginning to recover.
According to the Pretoria-based agency, manufacturing output
rose by 3.2% year-on-year in December compared with a revised 4.6% drop in November.
This was the first annual rise since September 2008.
"We expect the first half of 2010 to remain challenging for
manufacturers as demand is still weak and the rand remains strong," Investec Group economist Kgotso Radira said.
He did, however, expect improvement in the second half of the
year in line with general economic conditions.
"The main problem for the sector in the second half of 2010 will be the proposed electricity tariff increases, which could reduce the sector's global competitiveness," Radira said.
Commenting on the data, Nedbank Group economists said
manufacturing production was expected to continue to improve
gradually in the months ahead, mainly supported by higher export
sales on the back of the recovery in global demand.
Improved consumer confidence
"Domestic demand, particularly for durable goods will remain
weak due to high household debt levels and poor employment
prospects.
"However, some improvement in consumer confidence is likely to be experienced during the second half of the year as previous
interest rate cuts take effect, employment improves and inflation remains low," Nedbank said.
It noted that the expected upwards trend in manufacturing
production was also confirmed by the Kagiso purchasing manager's
index, a leading indicator of manufacturing activity which
increased to 53,6 in January, remaining above the critical 50 level, which divides expansion and contraction for the third successive month.
"Today's figures show that the economy is improving.
"However, the recovery remains uneven, with production picking up in line with stronger global demand while domestic spending remains fragile," Nedbank said.
Since the recovery in demand and job creation was expected to be slow and subdued, the South African Reserve Bank would probably be reluctant to hike interest rates too quickly.
"We therefore still expect rates to remain unchanged throughout 2010 with the risk to the downside over the next six months," Nedbank said.
- Sapa