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South African manufacturing output beats forecast on steady rand

JOHANNESBURG – South Africa’s manufacturing output rose more than expected in May to its strongest level in nearly a year due to a stable currency, but economists said production this year would be choppy.

Analysts said manufacturing was lifted by the rand’s recent rally to levels seen before December, when president Jacob Zuma’s decision to change finance ministers twice in a week sent the currency tumbling and dented investor confidence.

Manufacturing output in Africa’s most industrialised country rose by 4% year-on-year after rising by a revised 3,1% in April, Statistics South Africa said.

On a month-on-month basis, factory production was up 1,6%, and rose 1% in the three months to May, compared with the previous three months.

A Reuters poll of economists had expected the headline figure to show manufacturing grew by 2,4 %.

The rand was more than 10% firmer than its December low of 16,04. The currency has climbed to a two-month high after recovering, along with other emerging market assets, from a slump induced by uncertainty following Britain’s 23 June decision to exit the European Union.

Chief economist at Stanlib Kevin Lings said the manufacturing improvement was partly due to better performance in vehicle exports and the refined fuels area, and that “on a combined basis, these may help us avoid a recession.”

Analysts said manufacturers were also aided by a lower global oil price during the period, but cautioned that South Africa had not yet dodged a recession after the economy contracted 1,2% in the first quarter.

“While we are encouraged by the May performance, manufacturing data for the balance of the year is likely to be choppy,” said FNB senior analyst Jason Muscat.

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