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Johannesburg - Growth in South Africa’s manufacturing output slowed sharply to 0.2% year-on-year (y/y) in volume terms in December compared with a 4.6% increase in November, Statistics South Africa said on Thursday.
A Reuters poll on Monday predicted a y/y increase of 4.1% in December output.
Compared with November, factory production in volume terms fell by a seasonally adjusted 0.2% in December. Output grew by 1.1% in the three months to December compared with the previous three months, also on a seasonally adjusted basis.
Manufacturing is the economy's second biggest contributor to gross domestic product (GDP). It grew 4.9% in 2010, compared with -12.9% in 2009.
Analysts were surprised by the big drop in December output.
Eskom economist Mandla Maleka said the data may affect monetary policy.
"It may compel monetary policy to remain pretty accommodative for a long time to support the manufacturing output.
“For the three months ending in December, it is a shock for output to show a decline of 0.2%. That is a shock on a month-to-month basis.”
Kevin Lings, chief economist at Stanlib, said the data was a shock.
"This would suggest that manufacturing was a lot weaker and that weakness seems to have been, unfortunately, fairly broad-based," he said.
The motor industry was the only part of the sector that was holding up, he said.
However, he did not think the data would affect the interest rate outlook.
"Obviously if this weakness were to be sustained... then maybe the discussion would re-emerge on interest rates but at this stage the PMI (purchasing managers' index) number would suggest that this weakness was not sustained.”
Factory production contributes about 16% to GDP, but recovery has been tentative after a contraction in 2009 while SA was in recession.
The PMI, a key indicator of industrial activity ahead of official data, dipped to 51.7 in December before gaining to a seasonally adjusted 54.6 in January.
The index has been above the 50 level that marks the break-even point between contraction and expansion for two straight months, suggesting a sustained recovery in manufacturing.
A Reuters poll on Monday predicted a y/y increase of 4.1% in December output.
Compared with November, factory production in volume terms fell by a seasonally adjusted 0.2% in December. Output grew by 1.1% in the three months to December compared with the previous three months, also on a seasonally adjusted basis.
Manufacturing is the economy's second biggest contributor to gross domestic product (GDP). It grew 4.9% in 2010, compared with -12.9% in 2009.
Analysts were surprised by the big drop in December output.
Eskom economist Mandla Maleka said the data may affect monetary policy.
"It may compel monetary policy to remain pretty accommodative for a long time to support the manufacturing output.
“For the three months ending in December, it is a shock for output to show a decline of 0.2%. That is a shock on a month-to-month basis.”
Kevin Lings, chief economist at Stanlib, said the data was a shock.
"This would suggest that manufacturing was a lot weaker and that weakness seems to have been, unfortunately, fairly broad-based," he said.
The motor industry was the only part of the sector that was holding up, he said.
However, he did not think the data would affect the interest rate outlook.
"Obviously if this weakness were to be sustained... then maybe the discussion would re-emerge on interest rates but at this stage the PMI (purchasing managers' index) number would suggest that this weakness was not sustained.”
Factory production contributes about 16% to GDP, but recovery has been tentative after a contraction in 2009 while SA was in recession.
The PMI, a key indicator of industrial activity ahead of official data, dipped to 51.7 in December before gaining to a seasonally adjusted 54.6 in January.
The index has been above the 50 level that marks the break-even point between contraction and expansion for two straight months, suggesting a sustained recovery in manufacturing.
