JOHANNESBURG, Oct 11 (Reuters) - South Africa's manufacturing output beat market expectations in August, growing by 3.0 percent year-on-year in volume terms compared with a revised 6.3 percent rise in July, data showed on Thursday.
On a month-on-month basis production rose by a seasonally adjusted 3.0 percent and grew by 0.9 percent in the three months to August compared with the previous quarter, Statistics South Africa said.
Economists polled by Reuters earlier this week expected a 1.1 percent year-on-year contraction in August.
ANALYST COMMENT MANDLA MALEKA, ECONOMIST, ESKOM TREASURY
"One won't be too surprised because in general on the demand side we're fairly depressed ... and at the same time at the supply level there are no incentives to be aggressive because there's no destination for our internal exports.
"These numbers are telling a story that there's a glaring weakening in our economic conditions and we may see third quarter GDP numbers surprising on the downside.
"The monetary policy committee is going to be concerned; we heard the governor yesterday saying the current envioronment doesn't augur well for GDP numbers.
"I don't think they will take a stand to over-stimulate the economy by cutting interest rates but they may probably revise their outlook for this year and downscale for next year as well.
"There are conditions that warrant a cut, but equally we've got rising inflationary pressures -- whether we are talking about the rand story or domestic petrol prices or crude oil prices and allied with it, your global food prices.
"There's a confluence of factors that say inflation is on the upside and therefore don't cut interest rates in trying to stimulate the economy."
ANISHA ARORA, EMERGING MARKET ANALYST, 4CAST
"Basic iron, steel and metal products added 0.8 percentage points to the headline, up 4.2 percent y/y. This is the most surprising given that mid August marked the start of the mining unrest, which saw strike action and loss of the production at Lonmin mines.
"However September saw unrest spreading across the platinum belt, and into other sectors such as gold and coal mining and the transport industry, which should ultimately weigh heavily on the September output figures with the backlog of loss of production.
"The corresponding PMI for September sharply plunged to 46.2 which still leavs the outlook for Q3 manufacturing in the negative."
NICKY WEIMAR, SENIOR ECONOMIST, NEDBANK
"The challenges remain exactly the same, I don't think the latest statistics changed that at all.
"You still have an economy that is growing quite moderately, and areas of the economy are under very definite stress, especially mining production. Consequently, there's still a lot of downside risk to growth no matter how you look at it.
"We've got the challenges of the strikes in the short term and over the longer term we have a world economy that remains quite constrained and damaged.
"Right now, the Reserve Bank is likely to stay with interest rates unchanged, but warn of the risk of a weaker rand, high commodity prices on inflation in the future."
SALOMI ODENDAAL, ECONOMIST, CITADEL
"Under the circumstances it's a positive number because the manufacturing sector is having quite a difficult time as a result of the depreciation especially in Europe and also local demand that remains rather lacklustre.
"We expect the manufacturing sector to keep growing, but at a fairly slow rate. We don't expect any sharp pick-up in growth.
"We don't think there will be any change in interest rates unless there is some really negative happenings globally that will have some real negative impacts on South Africa - the labour strife adds uncertainty - but at the moment we don't see any change in the short term."
CHRISTIE VILJOEN, ECONOMIST, NKC INDEPENDENT ECONOMISTS
"The month on month number looks good, which can help explain why the year on year growth is better than expected.
"This was definitely not expected considering the problems in the mining sector that started in August would have had an impact in manufacturing as well.
"In the past three months production increased 0.9 percent from the preceding three months. We should take that as a positive considering all the negative international news that's telling us that the exports aren't doing that well and that exports might affect consumer confidence."
MARKET REACTION The rand was weaker at 8.7335 against the dollar at
1142 GMT from 8.6969 before the data was released at 1100 GMT.
The yield on the three-year bond edged up to 5.42 percent from 5.405 percent and that for the 14-year bond
ticked up to 7.725 percent from 7.71 percent.
- The manufacturing sector contributes about 15 percent of gross domestic product and is key for creating employment in an economy with an official jobless rate of about a quarter of the labour force.
- Output increased by 2.5 percent in 2011, only half of the expansion seen in 2010, Statistics South Africa data shows.
- South Africa plans to spend 5.8 billion rand over the next three years to help manufacturers affected by the global economic downturn upgrade their factories, improve products and train workers.
(Reporting by Tshepo Tshabalala, Xola Potelwa and Stella Mapenzauswa)
Keywords: SAFRICA MANUFACTURING/