South African manufacturing grew at a slower pace than economists forecast in July, while the current-account gap widened in the second quarter as exports slumped, undermining growth in Africa’s biggest economy.
Factory production rose 5.8 percent from a year earlier, less than the 6.2 percent median estimate of 11 forecasts in a Bloomberg survey. Output declined 1.1 percent in the month. The current-account deficit widened to 6.4 percent of gross domestic product, the highest gap in almost four years, the central bank said in a report released in Pretoria today.
“This data shows the second half is set to be much weaker and that the central bank was justified in taking an insurance rate cut,” Peter Attard Montalto, an economist at Nomura International Plc in London, said in an e-mailed response to questions today.
The Reserve Bank, led by Governor Gill Marcus, lowered its benchmark lending rate for the first time in 20 months in July, reducing it by half a percentage point to 5 percent to bolster the economy as Europe’s debt crisis curbs export demand. Finance Minister Pravin Gordhan said on Aug. 16 he will probably lower his economic growth forecasts in coming months. In February, he predicted expansion of 2.7 percent.
Manufacturing growth accelerated in July after a 6.1 percent slump in output because of a strike in the same month last year fell out of the calculation, according to the statistics office.
“Exports are under huge pressure across the board,” Kevin Lings, an economist at Stanlib Asset Management in Johannesburg, said in a phone interview. “You would have to blame the European situation. The slowdown in emerging Asia is also hurting us. South Africa has once again become much more import intensive. The rand is going to remain under some pressure.”
The trade deficit increased to 75.7 billion rand ($9.2 billion) in the second quarter from 42 billion rand in the previous three months as export volumes fell 2.7 percent, the central bank said today. Imports rose 1 percent as an acceleration in investment by government and utilities supported spending in the economy, it said.
“We expect the MPC to adopt a wait-and-see approach, ready to act if global conditions worsen dramatically but otherwise content to keep rates unchanged for an extended period if global and local conditions stabilize,” Busisiwe Radebe, an economist at Nedbank Group Ltd. in Johannesburg, said in a note to clients.
Consumer spending has come under pressure, easing to an annualized 2.9 percent in the second quarter from 3.1 percent in the previous three months, the central bank said.
The rand gained less than 0.1 percent today to trade at 8.1889 against the dollar as of 3 p.m. in Johannesburg. The yield on the government bond due 2021 rose 1 basis point, or 0.01 percentage point, to 6.585 percent.