Factory output slows in December

Johannesburg - Growth in South Africa’s manufacturing output slowed to 2.4% year-on-year in volume terms in December compared with an upwardly revised 2.8% increase in November, Statistics South Africa said on Thursday.

Economists in a Reuters survey expected year-on-year output growth of 2.6% in December.

Compared with November, production in volume terms was down by a seasonally adjusted 1.3% but was up 1.0% in the three months to December compared with the previous three months.

Peter Attard Montalti, emerging market economist at Nomura said the figure was "surprising the market a touch to the downside."

“Overall this number continues to show resilience in the face of export growth slowing much more sharply thanks to recovering domestic demand - however we expect the external shock to pass through and manufacturing growth should turn negative through the end of Q1. This number is strong enough to keep MPC in neutral/hold mode.”

The manufacturing sector contributes about 15% of gross domestic product and is key for creating jobs for the largely unskilled labour force.  

Manufacturing contracted by 1.9% in the third quarter of 2011 after an 8.8% fall in the second quarter. The Purchasing Managers’ Index (PMI) - a key leading indicator of manufacturing activity - rose to 53.2 in January, from 49.4 in December.

The Reserve Bank said in its monetary policy committee statement last month some improvement is expected in the mining and manufacturing sectors despite the less favourable outlook.