Weak SA factory data disappoints

Johannesburg - Growth in South Africa's manufacturing output slowed sharply to 0.4%  year-on-year in volume terms in April compared with an upwardly revised 4.9% rise in March, Statistics South Africa said on Thursday.

A Reuters poll last week showed the market expected a 5.0% y/y increase in factory output for April.

Compared with March, production in volume terms fell by a seasonally adjusted 3.7% in April and was up 2.3% in the three months to April, compared with the previous three months.

Analysts said the figure was weak and disappointing.

Colen Garrow, economist at Brait said weakness had been expected, but not to that extent.

"A number of factors are eventually coming through: it is the global economy being weaker than expected, domestic consumption slowing, the strength of the rand - all the factors are collectively conspiring to make manufacturing weaker," he said.

Kamilla Gold, economist at ETM it was a "particularly" weak number.

"What is concerning is that there is scope for manufacturing to weaken further in the year in accordance with the recent slowdown we have seen in global manufacturing. We still have got relatively weak demand as well," she said.

“This number speaks to maintaining relatively low interest rates well into next year.”

Manufacturing actory production contributes about 16% to gross domestic product but recovery has been tentative after a contraction in 2009 that pushed the country to its first recession in nearly two decades.

Recovery in the sector gained momentum in the first quarter of this year and grew by 14.5%, boosting gross domestic product.

The central bank said at its May meeting the sector was still underperforming and production levels were not at pre-recession levels yet.

The Purchasing Managers’ Index (PMI) - a key indicator of industrial activity ahead of official data - edged lower to 55.1 in May, from 56.4 in April.