JOHANNESBURG (Reuters) - South Africa's factory output grew above expectations in May compared with last year, backing the case for interest rates to stay unchanged at next week's policy meeting, although the central bank may cut them later this year to buoy the economy.
The Reserve Bank has kept rates at three-decade lows since late 2010 but some analysts believe it might have to give domestic growth more stimulus as a global downturn hurts exports while inflation is seen staying within target until 2014.
Growth in manufacturing production, which accounts for about 15 percent of GDP, outpaced forecasts at 4.2 percent year-on-year in volume terms in May, after rising by 1.1 percent in April, Statistics South Africa said.
The median consensus among economists polled by Reuters was for factory output to grow by 1.0 percent in May.
But the outlook for the rest of the year remains gloomy, with sales to Europe, South Africa's main trading partner, waning as the region struggles with the impact of its debt crisis.
"(The May data) is encouraging but I don't unfortunately think it's very revealing about what lies ahead because the global situation actually deteriorated so it catches us with a lag," said Nicky Weimar, a senior economist at Nedbank.
"The third quarter is probably going to be weaker than this number suggests." May's increase in factory output was mainly due to higher output in food and beverages, vehicles and accessories, transport equipment, and petroleum and chemical products, the statistics agency said.
On a month-on-month basis, production rose by a seasonally adjusted 2.7 percent, but contracted by 0.9 percent in the three months to May compared with the previous three months.
The rand recouped some of its earlier losses against the dollar, and was trading at 8.3450 compared with 8.3545 prior to release of the data at 1100 GMT.
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The Reserve Bank has kept rates at three-decade lows since late 2010 but some analysts believe it might have to give domestic growth more stimulus as a global downturn hurts exports while inflation is seen staying within target until 2014.
Growth in manufacturing production, which accounts for about 15 percent of GDP, outpaced forecasts at 4.2 percent year-on-year in volume terms in May, after rising by 1.1 percent in April, Statistics South Africa said.
The median consensus among economists polled by Reuters was for factory output to grow by 1.0 percent in May.
But the outlook for the rest of the year remains gloomy, with sales to Europe, South Africa's main trading partner, waning as the region struggles with the impact of its debt crisis.
"(The May data) is encouraging but I don't unfortunately think it's very revealing about what lies ahead because the global situation actually deteriorated so it catches us with a lag," said Nicky Weimar, a senior economist at Nedbank.
"The third quarter is probably going to be weaker than this number suggests." May's increase in factory output was mainly due to higher output in food and beverages, vehicles and accessories, transport equipment, and petroleum and chemical products, the statistics agency said.
On a month-on-month basis, production rose by a seasonally adjusted 2.7 percent, but contracted by 0.9 percent in the three months to May compared with the previous three months.
The rand recouped some of its earlier losses against the dollar, and was trading at 8.3450 compared with 8.3545 prior to release of the data at 1100 GMT.
yahoo.com
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