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Johannesburg - Growth in South Africa’s manufacturing output quickened to 1.3% year-on-year (y/y) in volume terms in January compared with a 0.2% expansion in December, Statistics South Africa said on Thursday.
A Reuters poll last week showed a consensus of 2.2% y/y increase in factory output.
Compared with December, production in volume terms rose by a seasonally adjusted 0.4% in January and by 3.1% in the three months to January, compared with the previous three months.
Brait analyst Colen Garrow said the figure was "quite low".
"It shows that the recovery is still quite fragile. It should be gaining a lot more traction, but it isn’t. One can maybe assume that the currency is playing a big role in it; the rand is headed the other way again," he said.
He said the rand could be keeping the hope of a "more stellar recovery in the economy somewhat down".
Macro strategist at Absa Capital Jeffrey Schultz said although the figure was lower that expected, it shows that the sector is gaining traction.
“It’s one (indicator) but I think certainly it is going to continue to add to overall GDP (gross domestic product) growth in the coming quarters.”
ETM economist Kamilla Golda said it was a "soft" start for the sector.
“It suggests that the South African economy is not ramping much higher any time soon and activity remains quite sluggish, and this favours a low interest rate environment. Basically it would call for interest rate hikes to be delayed rather than brought forward,” she said.
Factory production contributes about 16% to GDP but recovery has been tentative after a contraction in 2009 that pushed the country into recession.
The purchasing managers’ index (PMI) - a key indicator of industrial activity ahead of official data - rose to 54.6 in January and increased further to 54.8 in February.
The PMI has been above the 50 level that marks the break-even point between contraction and expansion since November, suggesting a sustained recovery in manufacturing.
A Reuters poll last week showed a consensus of 2.2% y/y increase in factory output.
Compared with December, production in volume terms rose by a seasonally adjusted 0.4% in January and by 3.1% in the three months to January, compared with the previous three months.
Brait analyst Colen Garrow said the figure was "quite low".
"It shows that the recovery is still quite fragile. It should be gaining a lot more traction, but it isn’t. One can maybe assume that the currency is playing a big role in it; the rand is headed the other way again," he said.
He said the rand could be keeping the hope of a "more stellar recovery in the economy somewhat down".
Macro strategist at Absa Capital Jeffrey Schultz said although the figure was lower that expected, it shows that the sector is gaining traction.
“It’s one (indicator) but I think certainly it is going to continue to add to overall GDP (gross domestic product) growth in the coming quarters.”
ETM economist Kamilla Golda said it was a "soft" start for the sector.
“It suggests that the South African economy is not ramping much higher any time soon and activity remains quite sluggish, and this favours a low interest rate environment. Basically it would call for interest rate hikes to be delayed rather than brought forward,” she said.
Factory production contributes about 16% to GDP but recovery has been tentative after a contraction in 2009 that pushed the country into recession.
The purchasing managers’ index (PMI) - a key indicator of industrial activity ahead of official data - rose to 54.6 in January and increased further to 54.8 in February.
The PMI has been above the 50 level that marks the break-even point between contraction and expansion since November, suggesting a sustained recovery in manufacturing.
