South African Manufacturing Growth Slows as Europe Debt Crisis Saps Demand
South African manufacturing growth slowed in December as Europe’s debt crisis curbed demand for exports to one of the country’s main trading partners.
Factory output rose 2.4 percent from a year earlier, down from a revised 2.8 percent in November, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of six economists was for production to increase 2.6 percent. Output fell a seasonally adjusted 1.3 percent in the month.
Europe, which is projected to fall into recession this year, buys about a third of South Africa’s manufactured exports. A slump in manufacturing and mining in the third quarter limited gross domestic product growth to an annualized 1.4 percent, the slowest pace in almost two years.
“The concern is the recession in Europe,” Nicky Weimar, an economist at Nedbank Group Ltd. in Johannesburg, said in a phone interview today. “I don’t think we’ve felt the full brunt of it.”
The central bank has kept its benchmark interest rate at a three-decade low of 5.5 percent since November 2010 to support the economy, even as inflation accelerated to above the 3 percent to 6 percent target in November and December. The bank will probably maintain its “accommodative” monetary policy stance, Weimar said.
The rand fell to 7.6421 per dollar at 2:23 p.m. in Johannesburg, from 7.6271 before the data was released. The yield on the R157 government bond, due 2015, rose 0.7 percentage points to 6.64 percent today.
Factory output may have increased in January, with the purchasing managers’ index climbing to 53.2 from 49.4 in December, indicating an expansion in production, Kagiso Tiso Holdings said on Feb. 1.
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