Manufacturing jumps to best in over two years as power woes ease

File: The basic iron and steel category saw 9.4 percent growth.

File: The basic iron and steel category saw 9.4 percent growth.

AFP/Pascal Lachenaud

JOHANNESBURG - South Africa’s manufacturing grew much more than expected in April as production of cars, electronics, metal products and furniture jumped, providing the first glimmer of hope for an economy mired in contraction and policy uncertainty.

Manufacturing output in Africa’s most industrialised economy expanded by 4.6 percent year-on-year in April, the biggest growth since June 2016, Statistics South Africa said on Tuesday, in the first positive data since a May vote returned President Cyril Ramaphosa to office.

Analyst surveyed by Reuters had forecast a modest expansion of 1.35 percent.

READ: Rand slips after poor local manufacturing data

Production of motor vehicles soared by 18.6 percent, electrical machinery jumped 12.2 percent and the basic iron and steel category saw 9.4 percent growth. Only clothing and footwear showed a contraction.

The economy shrunk 3.2 percent in the first quarter, data showed last week, with those shock figures followed by a squabble between government officials and the ANC over the mandate of the central bank, dragging the currency to a 1-year low.

Load-shedding at the start of the year battered manufacturing and mining. But since March, blackouts have eased after the government poured billions of rand in emergency funding into the utility.

READ: SA's economy declines in first quarter

“The biggest factor was load-shedding and now you have some normalisation. It’s the heavy energy users that have contributed the most. So we can anticipate a recovery, but it won’t be impressive growth,” said Nicky Weimar, a senior economist at Nedbank.

The data barely moved the rand which traded steady at 14.7800 per dollar at 1120 GMT. Bonds were soothed, with the yield on 10-year government issue down 6 basis points.

“We don’t foresee a recession this year. But the consumer spending will continue to struggle, especially with the conflicting messages coming from government and the ANC about economic policy,” Weimar said.

Stats SA publishes April retail sales data on Wednesday.

Source
IRESS