Feb manufacturing output disappoints on firmer rand, bottlenecks

10th April 2018

By: Reuters

  

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South Africa's manufacturing output came in below expectations in February following a run of five months of robust growth, with analysts pointing to a stronger rand and various bottlenecks, including the cost of doing business.

Manufacturing output rose 0.6% year-on-year in February, well below expectations of a 2.6% expansion, while monthly output was down 2.4%, the statistics agency said on Tuesday.

The declines were seen in the plastics and petroleum sectors as well as in publishing and printing. Production of food products, furniture and motor vehicles, however, remained positive, accounting for the marginally positive annual figure.

"It has been a patchy recovery for the industry especially if look at the world recovery that began already in 2017. It's taken our sector too long to respond to that momentum," said senior economist at Nedbank Nicky Weimar.

The World Bank raised South Africa's 2018 economic growth forecast for to 1.4%, from an earlier forecast of 1.1%.

South Africa's rand has been among the best performing emerging market currencies this year, advancing about 20% against the greenback since November.

Business confidence has hit its highest since late 2015 in January before easing slightly in preceding months on expectations that President Cyril Ramaphosa who was elected in February would lead economic reform and fight corruption.

Analysts however said industry leaders were waiting to see whether Ramaphosa could deliver on promises to revive growth.

Weimar said manufacturers were facing structural problems.

"The cost of doing business remains high, and the rand's recent strength has affected exports, while there is also a lot of spare capacity. All of that is holding back this recovery," she said.

Edited by Reuters

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