Manufacturing output falls 2.9%

Johannesburg - South Africa's manufacturing output fell 2.9% year-on-year in volume terms in February, the first contraction in five months, compared with revised 3.7% growth in January, Statistics South Africa said on Thursday.

On a month-on-month basis factory production fell by a seasonally adjusted 3.1% and by 0.1% in the three months to February compared with the preceding period.

Economists polled by Reuters had expected growth to slow.

Anisha Arora, analyst at 4Cast said: "Earlier released mining production arrived strong at 7.0% year-on-year and might have given a bit of false hope, but the rand so far hasn't actually reacted as much as one would expect to negative data.

"February's figure is the lowest since March 2012 and indeed looking ahead we wouldn't be optimistic for a strong rebound in manufacturing production after the Kagiso PMI recovery to 53.6 could not be sustained in March, down to 49.3.

"The fact that the strike action had the bigger impact on the basic iron and steel sector can be seen within this month's number. Thus with persistent economic activity and consumption worries, we expect this negative trend in the metals component to continue for some time."

The rand weakened to R8.8840 against the dollar at 11:15 GMT from R8.8640 just before the release of the data.

The yield on the benchmark 2026 government bond  nudged down half a basis point to 7.04%.

The Purchasing Managers' Index, a key signal of manufacturing activity before the official data, rose to 53.6 in February, but fell back into contraction territory in March.

The manufacturing sector contributes about 15% of gross domestic product and is key to creating employment in an economy where on average one in four people has been unable to find work for over a decade.

South Africa plans to spend R5.8bn over the next three years to help manufacturers affected by the global economic downturn upgrade their factories, improve products and train workers. 

Recent high-frequency data has pointed to an economy struggling to grow; suggesting interest rates will stay at four-decade lows for longer to ease pressure on debt-ridden households.