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Factory output down on car strikes

Johannesburg - Manufacturing output fell in August as strikes hit car production, pointing to sluggish growth for the  economy in the third quarter.

The factory numbers, coupled with data showing lacklustre growth in mining production, will be a worry for President 's ANC government as it heads into elections next year dogged by diminished growth prospects and an unemployment rate stuck at around 25%.

Manufacturing shrank 3.6% in volume terms in August compared with the previous month and grew only 0.2% on a year-on-year (y/y) basis, Statistics data showed.

This undershot even economists' pessimistic forecasts of 0.55% year-on-year growth.

The August contraction was underpinned by a 29% slide in output from the vehicles, parts and accessories sector, which translated into a 25% y/y drop.

The auto industry, which accounts for 6% of gross domestic product, has been hit by strikes in recent months. Carmaker BMW said this week the "inherently unstable" labour situation in had forced it to freeze expansion plans.

Strikes have also hit mining, which contributes about 5% to GDP but only managed 2.1% y/y output growth in August.

The latest data all points to weak third quarter growth, which has languished below an annual expansion rate of 3% since coming out of recession in 2009.

tried to reassure investors at a business dinner on Wednesday, saying enjoyed "a progressive labour relations framework" and his government was easing friction between labour and employers.

But simmering labour unrest has been cited as a factor by credit rating agencies in the past year as they have downgraded , expressing doubts that could fix structural problems in the labour market.

Economists have said a long-standing governing alliance between the ANC and unions has led to labour-friendly legislation which has made the jobs market overly rigid and is eroding the country's competitive edge.

Since 2000, real, after-inflation wages have risen 53%, while productivity has fallen by 41%, according to data.

"It's not very plausible that we're going to see massive rates of job creation in an economy faced with weak domestic demand, continued weak international demand and where labour relations are fractious at best," Absa Capital analyst told an economic briefing on Thursday.

"The only real job creation we've had has come through the public sector but that can't continue any longer because we have a fiscal issue now," he added, alluding to a budget deficit that has persisted at around 5% of GDP.

 
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