Manufacturing figures reduce hopes of repo rate cut

It is a trend that provides good news on growth prospects but reduces the chance of any rate cut at the end of the month.

Statistics SA said on Tuesday, 12 January 2010, that the physical volume of manufacturing output shrank by 4.7% year-on-year in November, down on the revised 9.6% contraction in October from 9.3%.

Compared with October, factory production in volume terms rose by a seasonally adjusted 0.7% in November.

Even better news was that output was up 2.9% in the three months to November compared with the previous three months, also on a seasonally adjusted basis.

Stats SA said although the year-on-year growth rate in manufacturing production remained negative in November, this was the least negative annual growth rate recorded so far in 2009.

November's decrease of 4.7% was mainly due to motor vehicles, parts and accessories and other transport equipment division being up 7.7%, together with four other sectors in the 10 measured.

The major downturns were in the wood and wood products, paper, publishing and printing division (-17.2%).

Reacting to the data, Investec Asset Management fixed income head Andre Roux said the figures provide yet another clear indication that the recovery was continuing.

“The numbers were better than expected and the recovery in vehicle manufacturing seems to be particularly strong in the short term,” said Roux.

The Reserve Bank's monetary policy committee meets on 25 and 26 January and there has been speculation that the strong rand might sway it towards a 50-point cut on top of the five points by which it has cut the repo rate since December 2008.

But opinion strengthened yesterday that the rate would remain at 7%, with prime staying at 10.5%.

Source: The Herald

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