JOHANNESBURG, Oct 11 (Reuters) - South Africa'smanufacturing output beat market expectations in August, growingby 3.0 percent year-on-year in volume terms compared with arevised 6.3 percent rise in July, data showed on Thursday.
On a month-on-month basis production rose by a seasonallyadjusted 3.0 percent and grew by 0.9 percent in the three monthsto August compared with the previous quarter, Statistics SouthAfrica said.
Economists polled by Reuters earlier this week expected a 1.1percent year-on-year contraction in August.
ANALYST COMMENT MANDLA MALEKA, ECONOMIST, ESKOM TREASURY
"One won't be too surprised because in general on the demandside we're fairly depressed ... and at the same time at thesupply level there are no incentives to be aggressive becausethere's no destination for our internal exports.
"These numbers are telling a story that there's a glaringweakening in our economic conditions and we may see thirdquarter GDP numbers surprising on the downside.
"The monetary policy committee is going to be concerned; weheard the governor yesterday saying the current envioronmentdoesn't augur well for GDP numbers.
"I don't think they will take a stand to over-stimulate theeconomy by cutting interest rates but they may probably revisetheir outlook for this year and downscale for next year as well.
"There are conditions that warrant a cut, but equally we'vegot rising inflationary pressures -- whether we are talkingabout the rand story or domestic petrol prices or crude oilprices and allied with it, your global food prices.
"There's a confluence of factors that say inflation is onthe upside and therefore don't cut interest rates in trying tostimulate the economy."
ANISHA ARORA, EMERGING MARKET ANALYST, 4CAST
"Basic iron, steel and metal products added 0.8 percentagepoints to the headline, up 4.2 percent y/y. This is the mostsurprising given that mid August marked the start of the miningunrest, which saw strike action and loss of the production atLonmin mines.
"However September saw unrest spreading across the platinumbelt, and into other sectors such as gold and coal mining andthe transport industry, which should ultimately weigh heavily onthe September output figures with the backlog of loss ofproduction.
"The corresponding PMI for September sharply plunged to 46.2which still leavs the outlook for Q3 manufacturing in thenegative."
NICKY WEIMAR, SENIOR ECONOMIST, NEDBANK
"The challenges remain exactly the same, I don't think thelatest 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 lotof downside risk to growth no matter how you look at it.
"We've got the challenges of the strikes in the short termand over the longer term we have a world economy that remainsquite constrained and damaged.
"Right now, the Reserve Bank is likely to stay with interestrates unchanged, but warn of the risk of a weaker rand, highcommodity prices on inflation in the future."
SALOMI ODENDAAL, ECONOMIST, CITADEL
"Under the circumstances it's a positive number because themanufacturing sector is having quite a difficult time as aresult of the depreciation especially in Europe and also localdemand that remains rather lacklustre.
"We expect the manufacturing sector to keep growing, but ata fairly slow rate. We don't expect any sharp pick-up in growth.
"We don't think there will be any change in interest ratesunless there is some really negative happenings globally thatwill have some real negative impacts on South Africa - thelabour strife adds uncertainty - but at the moment we don't seeany change in the short term."
CHRISTIE VILJOEN, ECONOMIST, NKC INDEPENDENT ECONOMISTS
"The month on month number looks good, which can helpexplain why the year on year growth is better than expected.
"This was definitely not expected considering the problemsin the mining sector that started in August would have had animpact in manufacturing as well.
"In the past three months production increased 0.9 percentfrom the preceding three months. We should take that as apositive considering all the negative international news that'stelling us that the exports aren't doing that well and thatexports 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 5.42percent 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 ofgross domestic product and is key for creating employment in aneconomy with an official jobless rate of about a quarter of thelabour force.
- Output increased by 2.5 percent in 2011, only half of theexpansion seen in 2010, Statistics South Africa data shows.
- South Africa plans to spend 5.8 billion rand over the nextthree years to help manufacturers affected by the globaleconomic downturn upgrade their factories, improve products andtrain workers.
(Reporting by Tshepo Tshabalala, Xola Potelwa and StellaMapenzauswa)
Keywords: SAFRICA MANUFACTURING/